Which Account Should You Draw From First in Retirement?
If you needed to pay for a new roof this year, which account would you use? I’d start by looking at what else is going on in your tax return. A withdrawal of money you contributed before taxes to a traditional IRA generally adds to your taxable income. A qualified Roth IRA withdrawal is free of federal income tax. And if you sell an investment in a taxable brokerage account, you may owe tax on the gain.
In a year when you’re already expecting higher taxable income, using some Roth money might make sense. In a lower income year, a traditional IRA withdrawal may fit your plan. I like to look at several years together so we can see how paying for something today might affect your choices next year. If you’d like to walk through that with us, you can reach our team atLegacyRetirementGroup.com.