Why Pulling From Your 401(k) Before Your Taxable Account Could Cost $45,000

Why Pulling From Your 401(k) Before Your Taxable Account Could Cost $45,000 David Beren Tue, June 30, 2026 at 11:36 PM GMT+7 5 min read Quick Read Pulling from taxable brokerage accounts before tax-deferred funds keeps retirees in lower brackets and can save over $45,000 in avoidable taxes. In 2026, married couples stay in the 12% bracket up to $100,800, giving retirees a window to drain 401(k) balances before RMDs hit at 73. Roth withdrawals don't count toward Social Security's provisional income threshold, while traditional IRA pulls can trigger taxes on up to 85% of benefits. Are you ahead, or behind on retirement? SmartAsset's free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don't waste another minute; learn more here. The conventional retirement plan goes something like this: stop working, claim Social Security, and start pulling from the 401(k) when the bills come due. That order feels intuitive because the 401(k) is usually the biggest pot, and retirees have spent decades being told to leave Roth money alone. The problem is that the intuitive order is often the most expensive one. The IRS taxes every dollar of a traditional 401(k) withdrawal as ordinary income, and stacking those withdrawals on top of Social Security benefits can push retirees into higher brackets and trigger taxation on benefits that would otherwise be partially shielded. In practice, the smartest withdrawal sequence usually runs opposite to what most households do by default. Taxable brokerage accounts come first because long-term gains are taxed at preferential capital gains rates rather than ordinary income rates. Tax-deferred accounts (traditional IRAs and 401(k)s) come second, deliberately drawn down in years when the retiree can stay within a lower bracket. Roth accounts come last, because every dollar inside a Roth grows tax-free and can be passed to heirs with no income tax liability. Reversing that order, or ignoring it entirely, is what creates the avoidable tax bill the headline references. Are you ahead, or behind on retirement? SmartAsset's free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don't waste another minute; learn more here. The 2026 brackets give retirees real room to plan. A single filer pays 12% on income over $12,400 and does not hit the 22% bracket until income crosses $50,400. Married couples filing jointly stay in the 12% bracket until $100,800. Layer on the $32,200 standard deduction for joint filers (or $16,100 for singles), and a couple can pull a meaningful traditional IRA distribution before any of it is taxed above 12%. A retiree who skips that window and lets the balance compound until required minimum distributions kick in often ends up withdrawing larger amounts in the 22% or 24% bracket later. Social Security further amplifies the underlying math. The program paid out $1,630.3 billion in benefits in the first quarter of 2026, according to the Bureau of Economic Analysis, and the 2.8% cost-of-living adjustment that took effect in January raised the income base for nearly every retiree on the rolls. Higher benefits push more households over the provisional-income thresholds at which up to 85% of Social Security becomes taxable. A traditional IRA withdrawal counts toward that calculation. A Roth withdrawal does not. Sequencing the withdrawals to keep provisional income lower in early retirement can keep more of the benefit out of the IRS's reach. A simplified framework most planners use: Taxable brokerage accounts first. Long-term capital gains are taxed at 0%, 15%, or 20% depending on income. Many retirees qualify for the 0% rate in early retirement before Social Security or RMDs begin. Traditional IRA and 401(k) next. Withdrawals are taxed as ordinary income. Pulling enough to "fill up" the 12% bracket each year reduces the balance that will eventually be subject to RMDs at 73. Roth IRA last. Distributions are tax-free, do not count toward provisional income for Social Security taxation, and have no required minimum distribution during the original owner's lifetime. Clark Howard's resident advisor, Wes Moss, has noted on the show that 71% of years are positive in the stock market, which is one reason planners often recommend leaving tax-advantaged accounts invested longer rather than draining them first. The tax treatment compounds the same way the returns do. Personal savings have slipped to 3.7% of disposable income in the first quarter of 2026, down from 6.2% two years earlier, and per capita disposable income now sits at $68,391. Tighter household finances leave less margin for an avoidable tax bill in retirement. Three practical adjustments tend to surface in planning conversations: Use the years between retirement and age 73 (when RMDs begi

Why Pulling From Your 401(k) Before Your Taxable Account Could Cost $45,000

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