Time to read: 5 mins

After years of saving, investing, and preparing for retirement, many people find themselves asking the same question when they get there: Now what? Specifically, how do I actually take money out of my accounts in a way that supports my lifestyle and makes sense financially?

That’s where distribution planning comes in.

Distributions refer to the money you withdraw from your retirement and investment accounts to support your life after work. While the concept sounds simple, the order and timing of withdrawals can impact your tax picture, your income stability, and the long-term health of your financial plan. Let’s walk through how distributions typically work across the three main types of accounts: tax-deferred accounts, Roth accounts, and brokerage (taxable) accounts.

Tax-Deferred Accounts: Traditional IRAs and 401(k)s

Most people have saved a significant portion of their retirement in tax-deferred accounts. These include Traditional IRAs and 401(k)s. When you contributed to these accounts, you received a tax benefit upfront. Now, in retirement, distributions are taxed as ordinary income.

Once you reach a certain age “currently in 2025 the age is 73 under federal law” you are required to begin taking withdrawals from these accounts. These are called Required Minimum Distributions, or RMDs. Even if you don’t need the income, the IRS requires that you begin taking these distributions annually once you reach the required age. If you do not take them, there may be tax penalties.

Some individuals begin taking distributions before RMDs begin in order to manage their taxable income over time. This approach is highly personal and often coordinated with other sources of retirement income.

Roth Accounts: Roth IRAs and Roth 401(k)s

Roth accounts are funded with after-tax dollars, which means qualified withdrawals in retirement are typically tax-free. To qualify for tax-free treatment, the account generally must have been open for at least five years, and the person taking distributions must be over age 59½.

Roth IRAs do not require distributions during your lifetime, which gives you more control and flexibility over how and when to use those funds. Roth 401(k)s do have required minimum distributions unless they are rolled over into a Roth IRA.

Because of their tax advantages, Roth accounts are sometimes used later in retirement or in years when you want to limit your taxable income from other sources.

Taxable Brokerage Accounts

Unlike retirement accounts, taxable brokerage accounts do not have age restrictions or required withdrawals. This flexibility can be very helpful when coordinating a retirement income strategy.

Withdrawals from a brokerage account are not taxed in the same way as IRAs. You pay taxes only on the gains when investments are sold, and in many cases, long-term capital gains are taxed at a lower rate than ordinary income. You can also use tax strategies such as tax-loss harvesting or capital gain management to help improve the efficiency of these withdrawals.

Because there are fewer rules in regards to distributions, brokerage accounts can be a useful bridge between retirement and Social Security, or as part of a broader strategy to manage your total income picture over time.

Why It Matters

The order in which you take distributions can affect more than just your tax return. It may influence your Medicare premiums, the amount of Social Security that is taxed, and the overall longevity of your retirement portfolio. A thoughtful approach to distributions can help align your income needs with your personal goals and the broader financial landscape.

Our team works with clients to create distribution strategies that reflect where they are in life and where they want to go next. There are many ways to build a retirement income plan, but the most effective ones are grounded in both careful planning and personal understanding. If you are approaching retirement or already in it, and you have questions about where to start, we’re here to help you think through your options.

All securities through Money Concepts Capital Corp. Member FINRA / SIPC.  Investments are not FDIC/NCUA insured. No bank or credit union guarantee. May lose value. Money Concepts Advisory Service is a Registered Investment Advisor with the SEC. The Tranel Financial Group is an independent firm not affiliated with Money Concepts Capital Corp.

This blog is for informational purposes. Certain information contained herein (including any forward-looking statements and economic and market information) has been obtained from published sources and/or prepared by third parties and in certain cases has not been updated through the date hereof. While such sources are believed to be reliable, The Tranel Group does not assume any responsibility for the accuracy or completeness of such information. The Tranel Group does not undertake any obligation to update the information contained herein as of any future date.