Picture two people. Call them Anne and Mark. Both retire at 62 with exactly $1,000,000 saved, split the exact same way: $600,000 in a traditional IRA, $250,000 in a regular brokerage account, and $150,000 in a Roth IRA. Same age, same savings, same spending needs — about $70,000 a year.

Twenty years later, one of them has noticeably more money left, has paid meaningfully less in taxes, and never had an unpleasant surprise from Medicare. The other didn't do anything reckless. They just spent their accounts in a different order.

That's the whole story of this post: the order you draw down your savings can matter as much as how much you saved in the first place.

Why order is even a decision

It's easy to assume all savings are basically the same — money is money. But the three common types of retirement accounts behave very differently when you take money out of them:

  • Traditional IRA / 401(k): Every dollar you withdraw counts as taxable income, the same as a paycheck would.
  • Brokerage account: You typically only owe tax on the gains, not the full amount, and often at a lower rate than ordinary income.
  • Roth IRA: Withdrawals are usually completely tax-free, since you already paid tax on the money before it went in.

Because these three "pots" are taxed so differently, the order you tap them in changes your taxable income every single year of retirement — which changes your tax bracket, your Medicare premiums, and how much of your money you get to actually keep.

Mark's approach: the intuitive one

Mark does what feels natural. He spends his brokerage account first, since it feels like "regular savings." Then, once that's gone, he moves to his traditional IRA. He plans to save the Roth account for last, since he's heard Roths are valuable and wants to preserve it as long as possible.

This isn't a bad instinct. It's just incomplete. Here's what happens:

  • In his 70s, Mark still has a large traditional IRA balance. The IRS eventually requires minimum withdrawals from these accounts starting at a certain age, whether he wants the money that year or not. Because he preserved his traditional balance for so long, his required withdrawals are large — large enough to push him into a higher tax bracket in years when he didn't need the extra income.
  • Those larger withdrawals also raise his Medicare premiums a couple of years later, since Medicare premiums are based on income from two years prior.
  • He never got the chance to convert any of his traditional IRA to Roth at a low tax rate, because he was still living off his brokerage account during the exact years — right after retiring, before Social Security and Medicare — when his income was naturally low and conversions would have been cheapest.

Anne's approach: coordinated, not sequential

Anne does something a little less intuitive. Instead of draining one account completely before touching the next, she draws a blend each year — mostly from her traditional IRA, topped up from her brokerage account, specifically calibrated to keep her taxable income in a low bracket. In the years before Medicare, she uses that same low-income window to convert a portion of her traditional IRA to Roth, filling up — but not exceeding — the room she has before her income would cost her a health insurance subsidy.

The result, twenty years in:

  • Her traditional IRA balance is meaningfully smaller by the time required withdrawals kick in, because she drew it down deliberately during her low-income years instead of avoiding it.
  • Her required withdrawals later in life are smaller and don't push her into a higher bracket.
  • Her Roth balance is larger than when she started, because of the conversions — meaning more of her money is now growing completely tax-free, for good.
  • She never crossed a Medicare premium threshold she didn't mean to.

Same starting savings. Same spending. A meaningfully better outcome — not because Anne earned more or took more investment risk, but because the order and blend of her withdrawals were coordinated instead of accidental.

The part that trips people up

Anne's approach requires something Mark's doesn't: looking ahead. Deciding how much to draw from where isn't a one-time choice — it's something that ideally gets revisited every year, weighed against your income, your age, upcoming Medicare eligibility, and how full your traditional account still is.

That's a lot to track by hand. It's also exactly the kind of thing a good retirement plan should be doing quietly in the background — not handing you a generic rule ("spend taxable, then traditional, then Roth") and calling it done, but actually calculating the blend that fits your specific numbers, year by year.

The takeaway

If you remember one thing from Anne and Mark: "How much did I save?" is only half the question. The other half — "in what order will I spend it?" — is just as capable of shaping your retirement, and it's the half almost nobody asks out loud.

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Next in this series: The 10 Years Before Medicare That Decide Your Healthcare Costs for Life