What’s Your #1 Retirement Mistake?
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By Ryan Thacker, Co-Founder, B.O.S.S. Retirement Solutions
Quick Summary
Most retirees focus on how much they've saved. Very few think about the order they withdraw it, and that oversight can quietly trigger higher taxes, inflated Medicare premiums, and a growing tax burden that compounds for the rest of retirement. In this post, I'll walk you through the withdrawal order trap, how it creates a domino effect across your entire financial picture, and what a coordinated plan looks like.
If you're already worried about paying too much in taxes in retirement, our team at B.O.S.S. offers a free, personalized Retirement Tax Savings Analysis that shows you exactly where your opportunities are, and how much you could save.
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Which Account Should You Withdraw From First?
It sounds like a simple question. You've spent decades saving across a handful of different account types, your traditional IRA or 401(k), maybe a Roth account, some after-tax savings, or a brokerage account. When retirement arrives and you need income, you just start pulling money out, right?
Not quite. The order you withdraw from those accounts can make a significant difference, not just in how much tax you pay this year, but in how much you pay for the rest of your life.
Here's what most people don't realize: this isn't just an investment question. It's a tax question, a Medicare question, and a Social Security question all at the same time. And the decisions are deeply interconnected.
The Most Common (and Costly) Mistake
When people retire, the most natural instinct is to draw from their largest account first. For most Americans, that's their traditional IRA or 401(k). It feels logical, that's where the bulk of the money is.
But every dollar you withdraw from a traditional IRA or 401(k) is taxed as ordinary income, just like a paycheck when you were working. Depending on how much you withdraw, you could push yourself into a higher tax bracket without even realizing it.
The Domino Effect: How One Withdrawal Triggers a Chain Reaction
Once you add Social Security income on top of IRA or 401(k) withdrawals, something most people never anticipate starts to happen.
1. Up to 85% of Your Social Security Benefits Could Be Taxed
When your combined income, withdrawals plus Social Security, crosses a certain threshold, the IRS begins taxing your Social Security benefits. Not a little. Up to 85% of your benefits can become taxable income. For someone receiving $2,500 a month in Social Security, that's a significant hit that didn't exist before that IRA withdrawal pushed income over the line.
2. Your Medicare Premiums Could Double
Medicare premiums aren't fixed. They're calculated based on your income from two years prior, which means the IRA withdrawal you took this year could raise your Medicare bill in two years. This is called the IRMAA surcharge (Income-Related Monthly Adjustment Amount), and it catches a lot of retirees completely off guard. In some cases, Medicare premiums can double or even triple depending on the income spike.
3. RMDs at Age 73 Make It Worse
At age 73, the IRS requires you to start taking Required Minimum Distributions from your traditional IRA and 401(k), whether you need the money or not. These withdrawals get larger every year, and every dollar is taxable. If you've been drawing heavily from these accounts already and haven't done any planning, RMDs can push you into an even higher bracket at exactly the wrong time.
The result is what I call the vicious cycle: you withdraw money to cover expenses, then withdraw more to cover the taxes on those withdrawals, which pushes your income higher, which increases your bracket, which means even more in taxes. One decision sets the next in motion.
Why Nobody Is Connecting the Dots for You
Here's something I see constantly, and it's one of the most frustrating parts of the retirement planning industry as it currently exists:
Your CPA is focused on last year's tax return. Your investment advisor is focused on portfolio performance. Your Social Security and Medicare decisions are being handled separately, often by different people or not at all. Everyone is doing their individual job reasonably well, but nobody is looking at how all of these things interact with each other.
That coordination gap is where retirees lose money. Not because of bad investment returns. Not because of market crashes. Because nobody mapped out how a single withdrawal decision ripples through taxes, Medicare, Social Security, and RMDs all at once.
What a Coordinated Withdrawal Strategy Actually Looks Like
When we work with clients at B.O.S.S., we don't look at these decisions in isolation. We look at the full picture, all income sources, the tax implications at each income level, Medicare thresholds, Roth conversion windows, and long-term RMD projections, and build a strategy around that.
In general terms, a coordinated withdrawal strategy often involves:
Drawing from taxable accounts first. After-tax savings and brokerage accounts are typically subject to lower capital gains rates rather than ordinary income rates, which can help keep your taxable income lower in the early years of retirement.
Managing IRA and 401(k) distributions strategically. Rather than drawing large lump sums that spike your income, strategic distributions keep you in a lower tax bracket, and below the IRMAA and Social Security taxation thresholds.
Using Roth accounts last, or strategically. Because Roth withdrawals are tax-free, they're a powerful tool for filling income gaps without triggering additional taxes. They're also not subject to RMDs, which makes them valuable for long-term planning.
Considering Roth conversions before RMDs begin. The window between retirement and age 73, when income is often at its lowest, can be an ideal time to convert traditional IRA funds to Roth at a lower tax rate, reducing the future RMD burden.
How this plays out in practice is different for everyone. It depends on your income sources, your tax situation, your healthcare costs, your timeline, and your goals. There is no universal right answer, which is exactly why this deserves a personalized plan, not a general rule of thumb.
Don't Pay More Than You Have To
Taxes are likely your single largest expense in retirement. The decisions you make about when and how to withdraw from your accounts, starting the day you retire, will shape your tax bill not just this year, but for the rest of your life.
The good news is that with the right plan in place, there's often significant opportunity to reduce what you owe. But that window doesn't stay open forever. The earlier you coordinate these decisions, the more flexibility you have.
If you'd like to see what a coordinated retirement tax strategy could look like for your specific situation, our team at B.O.S.S. offers a free Retirement Tax Savings Analysis. It's personalized, it's complimentary, and you don't have to be a client.
Learn more about our Tax Minimization services and schedule your free analysis →
Or call us directly: (800) 637-1031
About the Author
Ryan Thacker is the Co-Founder of B.O.S.S. Retirement Solutions and B.O.S.S. Retirement Advisors, a fiduciary RIA based in Lehi, Utah. Alongside his brother Tyson, Ryan has helped more than 55,000 families across Utah, Idaho, Washington, and Arizona build retirement income strategies focused on maximizing income, minimizing taxes, and protecting what they've worked a lifetime to build. B.O.S.S. currently manages more than $1 billion in retirement assets across 11 office locations.
Advisory services offered through B.O.S.S. Retirement Advisors, an SEC-Registered Investment Advisor. Insurance products and services offered through B.O.S.S. Retirement Solutions. Information contained in this material is for informational purposes only and is not intended as personalized investment, tax, or legal advice. You should seek advice on legal and tax questions from an independent attorney or tax advisor. Examples and hypothetical scenarios are illustrative only and do not guarantee future results. Actual results may vary. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of any individual. BOSS is not affiliated with the Social Security Administration, the U.S. government, or any government agency.
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