If you’re retiring soon, you need to consider when you should start making retirement account withdrawals.

The order in which you withdraw from your accounts is extremely important -- it could let your tax-advantaged accounts grow to their full potential, make your savings last and even save you money on taxes.

Before making any withdrawals, it's highly recommended to speak with a financial advisor to make sure you have the right plan in place so you don't deplete your savings too quickly.

How to Optimize Retirement Account Withdrawals

1. Start With Your Investments

Withdrawing from your investments first gives your retirement accounts more time to compound interest.

Whether you have mutual funds, a brokerage account, ETFs, stocks or bonds, they’re all taxable, so you’ll have to pay capital gains taxes on withdrawals. Some investments also require you to pay taxes on distributions each year, like some mutual funds.  

2. Move on to Your 401(k) and IRA

Once you’ve exhausted your investment portfolio, move on to your tax-deferred retirement savings accounts: your traditional 401(k) or IRA.

Unlike taxable investment accounts, you won’t be charged income tax or capital gains tax as your 401(k) account grows each year.

However, you’ll owe income taxes on withdrawals. Some 401(k) plans will automatically withhold 20% or so of your account to pay for taxes. Check with your plan provider to see how your particular 401(k) works. Additionally, speak with a financial advisor to formulate a tax strategy so you don't end up with a surprise tax bill.

3. Wait to Tap into Your Roth

Put off withdrawing money from your Roth IRA as long as possible.

You paid taxes up front so you can take money out of your Roth IRA and it won’t count as taxable income.

Your Roth IRA also will continue to grow tax-free as you tap into your other accounts. Since a Roth IRA holds after-tax funds and the IRS doesn’t need to tax it again, you also don’t need to take Required Minimum Distributions.  

4. Stall on Accepting Social Security Benefits

If you want your maximum Social Security benefits, you’ll need to work until your “full retirement” age.

Benefits at age 62, 66 or 67 are not your maximum benefits. The maximum Social Security retirement benefit kicks in at age 70.

Each year after full retirement, your payout increases by a certain percentage based on specific criteria. To maximize on this strategy, we recommend holding off until you are 70 — payments will be the highest possible, increasing by 8% each year you wait.  

5. The Best Way to Plan Your Withdrawals

Determining the optimal sequence to withdraw money from your retirement accounts is different for everyone, so we recommend speaking with a financial advisor.

Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with top fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is legally bound to act in your best interests. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.

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