Retirement marks an important financial transition—from relying on a steady paycheck to generating income from the savings and investments you’ve built over a lifetime. For many retirees, this shift can feel both exciting and overwhelming. With different accounts taxed in different ways, having a thoughtful withdrawal strategy is essential, as the decisions you make can greatly influence how long your money lasts and how comfortably you live in retirement.
A thoughtful, tax-efficient withdrawal plan can make a meaningful difference, both in your annual tax bill and in the total taxes paid over the course of retirement. In this article, we’ll walk through the main types of retirement savings accounts and explore common strategies for withdrawing from them in a tax-smart way.
Types of Savings accounts
There are three types of savings accounts that individuals use for retirement. The chart below outlines the types of savings accounts and their tax considerations, taken from Fidelity:
Taxable | Traditional | Roth | |
Examples | Brokerage & Savings (Cash) | IRA, 401k, 403b, etc. | Roth IRA, 401k, 403b |
Taxes | Capital gains tax | Income Tax | NONE |
Considerations | Capital gains taxes are assessed on assets that appreciate (stocks, bonds, real estate, etc.). There is potential to have no tax liability if income limits are met. | Distributions from traditional retirement accounts are subject to ordinary income tax rates. | Withdrawal from Roth accounts generally have no tax impact for income purposes, p[provide the owner is over 59 ½ and other criteria are met. |
Information taken from Fidelity Investments article.
Withdrawal Strategies
A key question every retiree faces is: Will my money last throughout retirement?
While general rules like the “4% withdrawal rule” are often referenced, there is no one-size-fits-all solution. A successful strategy considers lifestyle needs, market conditions, tax brackets, Social Security, pensions, and account structure.
Two common withdrawal approaches include:
The Sequential (Traditional) Withdrawal Method
This approach typically liquidates accounts on at a time, in this order:
- Taxable accounts first
- Traditional retirement accounts next
- Roth accounts last
This strategy can be effective when capital gains taxes are low and allows tax-deferred accounts to continue growing. However, it often results in:
- Lower taxes early in retirement
- Higher taxable income later when traditional account withdrawals and RMDs begin
This “tax bunching” can push retirees into higher tax brackets later in life and potentially increase total lifetime taxes paid.
The Proportional (Blended) Withdrawal Method
With this approach, retirees withdraw from each account type simultaneously, mixing taxable, traditional, and Roth assets throughout retirement.
Benefits may include:
- More consistent taxable income year over year
- Reduced risk of large tax spikes later in retirement
- Greater flexibility when managing RMDs and tax brackets
By spreading taxes more evenly over time, this strategy may lower total lifetime tax exposure for some retirees.
The most effective withdrawal strategy depends on your unique financial picture—your account balances, future tax brackets, income sources, and long-term goals. What works well for one retiree may be inefficient for another.
Careful planning helps ensure:
- Income lasts throughout retirement
- Taxes are managed proactively
- Assets are positioned wisely for both spending and legacy goals
Creating a tax-efficient withdrawal plan requires more than simple rules. It takes coordination, forecasting, and thoughtful decision-making.
If you’d like help designing a retirement income strategy that supports your lifestyle and protects your wealth long-term, our team at Cornerstone Financial Group would be honored to walk alongside you.
Building a strong foundation for your family’s future starts with smart planning today.
Bibliography:
Fidelity. (2026b, January 8). Savvy tax withdrawals. https://www.fidelity.com/viewpoints/retirement/tax-savvy-withdrawals
UBS Wealth. (2025, February 19). Maximize your savings: Tax-efficient retirement withdrawal strategies. UBS Wealth Management USA. https://www.ubs.com/us/en/wealth-management/our-solutions/planning/retire-planning/articles/maximize-savings-tax-efficient-withdrawals.html
OneAscent Financial Services, LLC (“OAFS”), d/b/a The Cornerstone Financial Group, is a registered investment adviser with the United States Securities and Exchange Commission. OAFS does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by OAFS or any unaffiliated third party. OAFS is neither an attorney nor accountant, and no portion of the presented content should be interpreted as legal, accounting, or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.