As you approach retirement, one of the most critical questions you’ll face is, “How should I withdraw money from my various accounts to ensure that my money lasts as long as I do?” The challenge isn’t simply about managing withdrawals but doing so in a tax-efficient manner while maintaining a sustainable income stream throughout retirement. With $1 million in assorted retirement accounts, there are strategic ways to take your money out that can make a significant difference in the longevity of your portfolio.

The goal here is to create a withdrawal strategy that minimizes taxes, preserves your retirement savings, and provides a steady stream of income for as long as possible. In this post, we’ll dive deep into how you should consider tapping your retirement assets — brokerage accounts, 401(k), and Roth IRAs — and explore the timing of Social Security benefits. By strategically withdrawing from each account type, you can optimize your long-term financial stability.

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The Basics: Understanding Your Assets

At 65, with $1 million in assorted retirement accounts, you likely have a combination of taxable, tax-deferred, and tax-free accounts. Here’s a breakdown of what these accounts mean for you:

1. Brokerage Accounts (Taxable Accounts):

   • Contributions: Made with after-tax dollars, and you pay capital gains taxes on investment income (dividends, interest, and capital gains).
   • Withdrawals: Generally not taxed (except for any capital gains or income), providing flexibility in withdrawal planning.
   • Benefits: Withdrawals are not subject to Required Minimum Distributions (RMDs) or other mandatory withdrawal requirements.

2. 401(k) or Traditional IRA (Tax-Deferred Accounts):

   • Contributions: Made with pre-tax dollars, and taxes are deferred until withdrawals are made in retirement.
   • Withdrawals: Taxed as ordinary income at your current tax rate.
   • Benefits: You can defer taxes for years, potentially lowering your taxable income in retirement depending on when and how much you withdraw.

3. Roth IRA (Tax-Free Accounts):

   • Contributions: Made with after-tax dollars, but all withdrawals (including earnings) are tax-free as long as you meet the eligibility requirements (at least five years since your first Roth contribution and age 59½).
   • Withdrawals: Tax-free, making it an excellent asset for growing tax-free income.

4. Social Security:

   • Benefits: Taxable depending on your income level but not subject to early withdrawal penalties. The age you begin taking Social Security (SS) benefits will have a significant impact on the amount you receive per month. Delaying SS until age 70 increases your monthly benefit by about 8% per year.

Withdrawal Strategy: How to Stretch Your Money

The primary goal of a withdrawal strategy is to minimize your overall tax liability while ensuring that your funds last. Here’s a step-by-step breakdown of a sensible withdrawal approach:

Step 1: Prioritize Taxable Brokerage Accounts

At first glance, you might be tempted to start withdrawing from your 401(k) or IRA to reduce the amount of taxable income in your brokerage account. However, withdrawing from your taxable brokerage account first often makes the most sense. Here’s why:

• Capital Gains Tax Advantages: Brokerage accounts allow you to manage your withdrawals in a tax-efficient manner. You only pay taxes on realized capital gains (when you sell an asset for a profit) and dividends/interest, which may be taxed at a lower rate than ordinary income. Long-term capital gains (on assets held for over a year) are typically taxed at 0%, 15%, or 20%, depending on your taxable income level.
• Flexibility: You have control over what you sell in a taxable account. This allows you to potentially harvest losses or manage taxable income in a way that minimizes the overall tax burden.
• No Required Minimum Distributions (RMDs): Unlike 401(k) or IRA accounts, taxable brokerage accounts do not require minimum distributions, giving you more flexibility and allowing your investments to grow.

The strategy here would be to focus on withdrawing from your brokerage account until it is either depleted or you approach a tax bracket that makes it more beneficial to draw from other accounts (e.g., the 401(k) or Roth IRA). You can also consider tax loss harvesting (selling investments at a loss to offset gains) in your brokerage account to further lower your taxable income.

Step 2: Use the 401(k) and Traditional IRA Wisely

Once your brokerage account begins to deplete, or if you reach a point where it’s more tax-efficient, you can begin to pull from your 401(k) or traditional IRA. This is where things get a little tricky because 401(k) withdrawals are subject to ordinary income tax, which could potentially push you into a higher tax bracket.

Here’s how to manage 401(k) withdrawals:

• Manage Your Tax Bracket: Be mindful of your taxable income and the tax bracket you’re in. The IRS has a progressive tax system, so the more income you pull, the higher the rate at which the extra income will be taxed. If you’re able, try to keep your taxable income below certain thresholds so that your 401(k) withdrawals are taxed at a lower rate.

• Strategic Withdrawal Amounts: Rather than withdrawing a large lump sum, consider taking smaller, more measured distributions that keep you in the lower tax brackets. For example, in 2025, the 22% tax bracket for a single filer starts at around $44,725. If you’re near that threshold, you might want to withdraw just enough to bring you up to the top of the 12% bracket ($44,725).

• Consider Conversions to Roth IRAs: Depending on your income, it might make sense to use your 401(k) withdrawals as an opportunity to convert some of your 401(k) funds into a Roth IRA, a strategy known as Roth conversions. This way, you pay the taxes now but enjoy tax-free withdrawals from the Roth IRA in the future. This strategy could be beneficial if you anticipate being in a higher tax bracket later on.

Step 3: Delay Social Security Benefits

One of the most powerful strategies for maximizing lifetime retirement income is delaying Social Security benefits until age 70. For every year you delay taking Social Security beyond your full retirement age (usually 66 or 67, depending on when you were born), your benefit increases by approximately 8%. For example, if your full benefit is $2,000 per month, waiting until 70 could increase that to $2,640 per month — a substantial 32% increase.

Why delay? There are a few compelling reasons:

• Increased Monthly Income: By waiting until 70, you’ll lock in a higher monthly income for the rest of your life. If you expect to live a long life (say, into your 90s or beyond), this increase can translate to a significantly higher total payout over your lifetime.
• Longevity Insurance: Social Security is essentially a form of longevity insurance. If you start taking it early, you might receive smaller payments over a longer period of time. Delaying can be particularly advantageous if you have other assets to draw on in the interim.
• Tax Efficiency: If you wait to start Social Security, you may not need to pull as much from your taxable accounts, thus lowering your taxable income in the early years of retirement.

However, there’s a tradeoff. If you have health concerns or may not live long enough to see the full benefit of delaying Social Security, you might opt to begin taking it earlier. In this case, consider how taking SS early affects your overall financial plan, and use your other accounts to bridge the gap.

Step 4: Use the Roth IRA Strategically

Roth IRAs are often considered the “golden child” of retirement accounts because they allow for tax-free withdrawals. But should you tap into your Roth IRA early in retirement?

• As a Reserve: It might make sense to keep your Roth IRA intact for as long as possible, allowing it to grow tax-free. Roth IRAs don’t have Required Minimum Distributions (RMDs), so they offer excellent long-term growth potential. By using Roth IRAs sparingly, you can preserve them for future tax-free income, especially if tax rates rise in the future.
• Consider the Tax Implications: If you find yourself in a higher tax bracket in later years, Roth withdrawals can provide a tax-free source of income without increasing your tax burden. They can be especially useful in the later stages of retirement when other assets are depleted.

Step 5: Reassess Periodically

Life circumstances and tax laws change, so it’s essential to regularly reassess your withdrawal strategy. Each year, review your portfolio, income, expenses, and tax situation to determine whether you need to adjust your approach. You might want to consult with a financial advisor annually to ensure your strategy remains aligned with your long-term goals.

Conclusion: The Ideal Strategy for a 65-Year-Old with $1 Million in Retirement Accounts

To summarize, the ideal withdrawal strategy for a 65-year-old retiree with $1 million in assorted retirement accounts is as follows:

1. Withdraw from the Taxable Brokerage Account First: Capital gains tax rates are generally favorable, and there are no mandatory RMDs.
2. Withdraw from the 401(k)/Traditional IRA Next: Manage these withdrawals strategically to minimize taxes, keeping your income in lower tax brackets, and consider Roth conversions.
3. Delay Social Security Benefits Until Age 70: This maximizes your monthly Social Security payments and provides longevity insurance.
4. Preserve Roth IRA for Tax-Free Growth: Use Roth IRAs as a reserve to minimize taxes and maximize tax-free income in later years.

By carefully managing these accounts, you can minimize taxes, protect your portfolio, and enjoy a more financially secure retirement that lasts for decades. Please note that everything written here is on a high level, generic, 30,000 foot view and cannot necessarily be applied to your particular situation. Your situation may vary. Always seek the guidance of a financial professional when discussing financial planning matters.