Retirement Withdrawal Sequencing Calculator United States

What the withdrawal sequencing calculator does

Enter the after-tax income you need for the year, the balances in your taxable, tax-deferred and Roth accounts, and your estimated tax rate on each type of withdrawal. The calculator meets your need by drawing the accounts in the conventional tax-efficient order and shows how much comes from each, the total tax, and whether your accounts cover the target.

Two retirees with identical savings can pay very different lifetime tax depending on the order they withdraw in. Tax-deferred withdrawals are taxed as ordinary income, qualified Roth withdrawals are tax-free, and taxable accounts fall in between, so the order affects both this year's tax and how long the money lasts.

The conventional order

The usual sequence is taxable accounts first, then tax-deferred accounts such as a traditional 401(k) or IRA, then Roth accounts. Taxable accounts are taxed only on gains, often at long-term capital-gains rates, so spending them first is relatively cheap, while tax-deferred and Roth money keeps compounding inside its shelter.

Every dollar from a tax-deferred account is ordinary income, and spreading those withdrawals over many years can keep you in lower brackets than a rush late in retirement. Roth accounts come last: qualified withdrawals are tax-free, there are no required minimum distributions during the owner's lifetime, and they are among the best assets to leave to heirs. Keeping them longest maximizes tax-free growth and leaves a tax-free reserve for emergencies or large purchases.

How the calculation works

The calculator fills your after-tax need one account at a time. For taxable and tax-deferred accounts, tax reduces what you receive, so it grosses up each withdrawal: the gross amount needed is the net amount divided by one minus the tax rate, and the difference is the estimated tax.

It takes from the taxable account first, up to its balance. If that is not enough, it moves to the tax-deferred account and grosses up at the ordinary-income rate you entered. Any remaining need comes from the Roth account, where gross equals net because withdrawals are tax-free. If all three run out, the remainder is shown as a shortfall.

Reading your results

The main output is the total gross withdrawal needed to net your spending target. Below it are the amounts from the taxable, tax-deferred and Roth accounts, the estimated tax on the taxable and tax-deferred portions, and the net income funded.

The effective tax rate, total tax as a share of the gross withdrawal, is a useful year-to-year benchmark. It is often low early in retirement, when you live mostly on taxable savings, and rises as you move into tax-deferred withdrawals. Watching it can show whether a Roth conversion in a low-income year, or taking tax-deferred withdrawals earlier, might lower your lifetime tax.

Choosing tax rates and strategy

The rate on taxable withdrawals depends on how much of each dollar is gain and whether the gains are long-term. The rate on tax-deferred withdrawals depends on your ordinary-income bracket once those distributions are added to Social Security, pensions and other income. Circumstances vary, so you enter the rates yourself.

The conventional order is a strong default, not a fixed rule. Sometimes a blend works better, such as small tax-deferred withdrawals early to fill low brackets, or Roth withdrawals in a high-income year to avoid a higher bracket or higher Medicare premiums. Required minimum distributions also eventually force tax-deferred withdrawals. Start with this single-year sequence, then discuss more advanced tactics with a financial or tax professional.

You can also enter an ambitious spending figure to see whether your accounts can sustain it and how large a shortfall would be. Rerun the numbers each year and update the rates as your situation changes.

This is general educational information only and not tax or investment advice. Consult a qualified professional before making retirement withdrawal decisions.

About This Withdrawal Sequencing Calculator

Use this withdrawal sequencing calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.