At 67, I’ve maxed out my retirement accounts. Which one is the best to use once I retire?

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At 67, I’ve maxed out my retirement accounts. Which one is the best to use once I retire?

Laying the groundwork to have a retirement nest egg takes a lot of work.

As of 2022, the average retirement account balance among 67-year-olds was about $609,000, according to the Federal Reserve. If your nest egg is equal to or greater than that number, it means you’ve done a stellar job of building retirement wealth.

But saving is only one part of the foundation. Making money last is the mortar that keeps it all together.

To that end, you have to be strategic about tapping your savings. That means coming up with a withdrawal rate that works for you. It also means knowing which of your retirement accounts to take money from first. Assuming you have a mix of accounts that include savings, a brokerage account, a traditional IRA, and a Roth IRA, here’s the order you may want to work with.

Logically, you’ve placed some of your retirement savings into a taxable brokerage account. IRAs (and 401(k) plans, for that matter) force you to wait until age 59 1/2 to withdraw money penalty-free, and they limit the amount of money you can contribute toward retirement on an annual basis.

A brokerage account lets you invest as much money as possible in a given year. And you can withdraw from that account without a penalty at any time. It pays to tap your brokerage account first because, in retirement, you’re not enjoying tax-deferred or tax-free gains. You might as well leave your accounts that are getting those benefits alone as long as possible.

If you have a traditional IRA, you’ll have to use it at some point to fulfill your required minimum distribution (RMD). Failing to take an RMD results in a 25% penalty.

If you’re 67 now, RMDs start at age 73. But even if you’re not there yet, it’s smart to take money out of a traditional IRA next because your associated tax bill is pretty predictable.

You don’t, however, know what the future has in store for tax rates. If they go up after the Tax Cuts and Jobs Act expires at the end of 2025, your traditional IRA withdrawals could cost you more. So it pays to withdraw that money now because if anything, tax rates may go up over time, not down.

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