Where Should You Pull Funds from First in Retirement?

When you retire and you no longer have a paycheck, it can be overwhelming to determine where to pull income from first. Should your retirement income come from your investment accounts, social security, pension, rental income or some other source? In this comprehensive video, James Conole is talking about how to maximize your retirement income, how to reduce your retirement expenses, and how to avoid paying any additional taxes in retirement.
Be sure to watch until the end to see the tips on retirement planning and how to get the most out of your retirement portfolio.
00:00 - Introduction
1:00 - Income in Retirement
1:30 - Any Fixed Income Sources?
2:48 - Social Security
4:16 - Managing All Of Your Accounts
5:10 - Tax-Free Growth
6:54 - Understanding Your Taxable Income
8:47 - Investment Portfolio Strategy
10:11 - How To Keep Your Taxes Low
11:38 - How To Pay 0% in Taxes
12:02 - Provisional Income (Social Security)
13:20 - Medicare Surcharges
14:06 - Overview
15:05 - SUBSCRIBE!
SUBSCRIBE HERE: / @rootfp
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Website: rootfinancialpartners.com/
Podcast: readyforretirement.co/
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Facebook: / rootfinancialpartners
LinkedIn: / 18347030

[@gilmarcotte9017]

I am 76 years old and had to make most of those hard decisions that James is talking about. I had to learn a lot from watching various youtube video and subscribing to a lot of financial newsletters over the years. James is good at what he does and he explains it in simple, understandable terms. Great job James.

[@RootFP]

Thanks Gil!

[@richardallen6432]

My sentiments exactly...I have limited brain cell capacity and James makes it easy to understand.

[@GotGracexxxxx]

Great points. Lots to think about there. I’ve been working on growing passive income (rentals), with the goal of not having to touch brokerage and retirement accounts after I leave my W-2 job. However, you have provided reasons to look at drawing from tax-deferred accounts, for instance, even before RMDs kick in. In fact, I suppose that in certain situations, it might maximize tax efficiency and life enjoyment to retire some number of years earlier, and substitute tax-deferred account withdrawals for active income.

[@christinecurto4140]

this information is invaluable. the manner in which you convey is precise, easy to understand. It gives good direction on how to think differently about this whole retirement strategy. Thank you so much! Love LOVE your content!!!

[@edwardlozano9619]

This is the best representation of the variables facing imminent retirees that I havd seen. Quite comprehensive. Thank you.

[@toddmaniatoddmania9844]

EXCELLENT video!

[@Ray3645]

Great, helpful video, James. You explain things very clearly. Thank you!

[@RootFP]

Thank you!

[@Patrick-xo8ht]

Fantastic video. These are all issues I’ve been thinking about and this video did a great job summarizing them all.

[@RootFP]

Glad to hear it!

[@blackie-jm9tr]

Great advice, thank you James.

[@LNDN_73]

Clearly presented and easy to follow. Thank you.

[@jedk1756]

You explain things very clearly. Thanks for the videos. Lots of helpful info.

[@Andrew-zh6jl]

Comprehensive video that pulls together all the aspects of income, taxes, provisional income, Roth conversions and Medicare surcharges that I am concerned about. Many financial planners are focused on growth of portfolio and seem to be less concerned with these things, which can end up being very costly to the portfolio.

[@pedrogarces6876]

Great explanation! This is a topic that needs plenty of attention to reduce tax burden in retirement. New subscriber!

[@chickenbohaine]

Excellent job explaining the many variables at play in retirement planning! This is one of the best videos I have seen on this subject! You have gained a new subscriber here! 👏🏼👏🏼👏🏼

[@RootFP]

Thank you!!

[@lalitpandit1510]

The best retirement videos I have come across. Thank you.

[@RootFP]

Thank you!

[@roberttaylor667]

Well done. I have been using these strategies for years, This video confirmed I was right. You never know what life will throw at you. I have tended to us my IRA last because as I get older my medical bill increase. Going to a nursing home would really add a lot of tax deductions, almost guaranteeing that the IRA distributions would be taxed low or zero. That would leave more cash to cover my bills and reduce the impact on my wife or my heirs.

[@bigbri3410]

Great info. You explained in clear simple information. You should do a fee based zoom meeting per person so you can expand your business reach. Not that you need it but there are few people out there who explain it as well as you do. Nice job

[@anacaona1982]

Great Video! Very helpful & educational. Thank you for doing this.

[@twilde3754]

Thank you! Good information.

[@RickyMitchell-hz4id]

Great explanation, thank you!

[@snocone6228]

What a great video with what many retirees are facing. The detail was fantastic so thank you so much!

[@denniskirschbaum9109]

This is one of the best videos I have seen on this topic. You are a natural teacher.

[@RootFP]

Wow, thank you!

[@lisab1312]

Explained very well!

[@HB-yq8gy]

Best explanation ever!

[@dansalas399]

Thanks James! Well done!

[@RootFP]

Thanks Dan!

[@joemccarty2061]

Great info, thank you!

[@juliemarkham4332]

Awesome information, James. Thank you!

[@RootFP]

You’re welcome!

[@davewhetton8932]

This was so helpful to us as we approach retirement. Thanks for this info. Just subscribed!

[@RootFP]

Welcome to the channel!

[@davidpratt5456]

Thanks for this clear and concise explanation.

[@RootFP]

You’re welcome!

[@leocaranto1758]

Good points James, i learned a lot

[@RootFP]

I'm glad to hear that, Leo!

[@AnthonyHoward-bl9bs]

Great info , thanks

[@melanienormand766]

Excellent video. Thank you.

[@RootFP]

You are welcome!

[@Elephantine999]

Another great video--such clear, authoritative information. 👍

[@xavieracoleman2657]

I loved this video.. you explained it excellently

[@francisdeans9610]

Ok first your right about the $80,250 being tax at 12%. But that's after exemptions. Where you're wrong is that you get a tax exemption for being married of $25,100 so you can actually take out $105,350 and only pay $9235 in taxes which is more like 8.8 percent of the $105,350. You get to keep $96,115 not bad for only 12% tax bracket. Remember the first $19,750 is taxed at 10 percent. Plus the 25100 exemption at 0 percent tax gives you that 8.8 percent total.

[@joycewright5386]

But don’t forget IRMAA. The taxes on Medicare are calculated before any deductions.

[@micheleyoungblood]

​@@joycewright5386using the numbers Francis is speaking about - staying in the 12% tax bracket, IRMAA is not a problem requiring concern

[@lavernec7812]

Great advice!

[@BSGSV]

This is an excellent presentation with good information. Well done, sir.

[@RootFP]

Thank you

[@andregriffin2836]

Good information to follow !!!!!!👌

[@anthonygardner400]

2k subs! Congratulations! Well deserved.

[@RootFP]

Thank you!

[@joelpless4214]

Thank you, James. I hope to work until I am 70 and then collect Social Security, so what you said about income coming from non-retirement accounts was meaningful to me. Keep up the excellent work.

[@RootFP]

Thank you!

[@avantsoapstudio6654]

I bought into always investing in 401Ks but now at 58 I'm having to plan for Roth conversions so I don't get slammed on taxes at 72 and RMDs. Wish I would have invested more in Roth IRAs when I was younger.

[@AngelCruz-qi1ev]

Why are you worrying about 72 worry about now. That's 14 years from now really. Retired when you want to. Not when the government wants to.

[@avantsoapstudio6654]

@@AngelCruz-qi1ev I agree - but knowing that when 72 hits I'll be paying excessive taxes on my RMDs it does make some sense to start planning now on how to offset some of that.

[@josephsullivan8654]

James - excellent video! Your senario was exactly what Im dealing with today in retirement. Im three years into retirement and now focusing on the taxes im paying and where do I pull for my income streams. Between social secuirity and pension, Im already in the 22% tax bracket. Any additional funds Im paying 22% and 24%. I keep looking at all three buckets and playing around with the numbers. As you said, there are multiple ways to get the amount I need to get to every year. I will reach out to you on your website and see what your consultation fees will be. Joe

[@ashakuldip1657]

Thanks for the information.

[@RootFP]

You’re welcome!

[@JB-gh5xl]

Excellent video…thank you!

[@RootFP]

Thank you

[@brucebuckeye]

Awesome! Great presentation!

[@RootFP]

Thank you, Bruce!

[@gregorymcmahan3914]

James, Good advice overall. You hinted at the onerous trade-off between immediate income today (from an investment portfolio) and taxes, and the trade-off between taxes and continued portfolio growth and longevity (while hopefully throwing off income). Keep up the good work!

[@RootFP]

Thanks, Gregory!

[@sct4040]

Age 62 now, I plan to apply for SS, then my 403B/IRA accounts, then Roth in that order. My father died at 60 and never enjoyed a dime of his savings, working hard all those years. We never know how much time we have. SS is supposed to be for my lifetime, and what's left from hubby's account.

[@RootFP]

That's exactly right. We can plan all we want, but we really never know.

[@user-tw6pd3rt6b]

Thanks so much I really appreciate u.. and I'll be reaching out to u tomorrow

[@jamesbecker4326]

excellent video, thank you

[@RootFP]

Thanks James!

[@alphamale2363]

Good overview. Thanks.

[@RootFP]

Thank you for watching!

[@kanakCO01]

Very helpful information in a simple language.

[@RootFP]

Glad it was helpful!

[@Post4JM]

Great video 🎉 Very informative. Thank you for the hard work ❤

[@thomasshreve750]

Very helpful!

[@RootFP]

I'm glad to hear it!

[@wmolinari882]

Very informtive1 Good Job!

[@RootFP]

Thank you!

[@kw7292]

Great information

[@RootFP]

Thank you!

[@jpcomp5159]

Most informative & best info I have heard for someone like myself who is approaching retirement = THANK U SO MUCH!

[@RootFP]

Thanks JP! I’m glad it was so helpful!

[@Index-o1234]

Great video....-Subscribed

[@RootFP]

Thanks Thomas!

[@stevewoods8116]

Great Information!!! New Subscriber!!!!

[@stopwars8642]

good info some new things I never knew surcharges

[@seantango2754]

Taxes is why I plan to start withdrawing from my 401K up to my tax bracket in pre-retirement and put those funds in my ROTH or maybe my HSA. Have another couple of years to decide that. When I retire in 10 years, I won't have to worry about a big tax hit.

[@fashionsenseforthewiseands2023]

some really good info

[@RootFP]

Glad it was helpful!

[@edcastillo4456]

If someone has to rely upon their portfolio for 50% of their income, then you also have to disclose the volatile nature of that portfolio, and the likelihood that in some years they might not be able to withdraw the amount intended. Even conservative allocations ( mostly bonds or fixed income) are susceptible to interest rate risk, and might not yield enough to meet income needs, unless it's a sizeable amount.

[@corneliusashton287]

Great job explaining. I almost decided to move to the next video because you look so young lol. However, you've explained the options better than the older dogs lol. Go James!

[@RootFP]

Glad you stayed to watch!

[@Roamey71]

Great video. Next, you should do a video on what investments to pull from for the actual RMDs. During bad years, do we pull from bonds or income mutual funds or growth funds, etc to meet the demands of the RMD. I assume you would want to pull from your better performing funds or stocks for your RMD income.

[@Dr.TJ1]

One more point about tax deferred accounts, which may only be a consideration if the amount in tax deferred accounts is significant. If you are single and die early, your heirs will have to withdraw all the money in those accounts within 10 years, which means if they are still working, they have to add those withdrawals to their work income. That means the withdrawals could be taxed at a much higher rate than if the retiree were taking the withdrawals. For example, if there is $1 million in a traditional IRA and you die with one heir (a child) and your child makes $80,000 at their job, the child would need to take at least $100,000 out of the traditional IRA every year for 10 years to draw the account down to 0. This would push their taxable income to $180,000, some of which is taxed at much higher rates. I say at least because if the traditional IRA is invested and continues to earn, the child will have to take out more than $100,000 per year which means even more of it would be taxed at the higher rates. On the other hand, a Roth doesn’t have to be closed within 10 years and there are no required minimum distributions. So my strategy is to move a portion of my traditional IRA to my Roth every year to potentially lessen the tax burden on my two daughters.

[@RootFP]

Good point.

[@TheFirstRealChewy]

Find the fountain of youth.

[@Old_Sailor85]

Like I care what taxes my heirs need to pay. I saved that money for my wife and myself. They can have what's left, if anything.

[@rayzerot]

​@@Old_Sailor85Right? I'm raising my kids to be self-sufficient. Any money from me will be a pleasant bonus to them. You don't need generational wealth if you have self-generated wealth built off a solid childhood foundation

[@jameswitte5676]

Wealthy families stay wealthy because they plan ahead.

[@dww1213]

Thus is great information. Thanks. I was just about to make the mistake of withdrawing from my one Roth account

[@willcornejo2395]

Nice. Thanks

[@RootFP]

Thank you.

[@chotunab]

Very good video

[@RootFP]

Thank you

[@dancasey9660]

Live off taxable accounts or cash in the early years of retirement, delay Social Security and do Roth Conversions to the maximum of the lowest possible bracket possible. For most that will be the top of the 12% bracket.

[@irishrover1417]

Spot on and ACA credits to reduce HC costs

[@Antandthegrasshopper]

Doing exactly the same and I'm retiring early at 56.

[@noureddineelalam75]

Be careful. You may not see much of your ss income. If you don't use it, you lose it.

[@dancasey9660]

@@noureddineelalam75 Doing it for my wife as my benefit is larger than hers. Maybe I go early, but given how healthy my wife is, how well she eats, and how much she exercises, she'll probably live to 100!

[@noureddineelalam75]

@@dancasey9660 You are a good man. I didn't think of the spouse expecting less, and is perhaps younger. Good luck!

[@bvs4051]

I found your video to be very informative and easiest to understand especially now that I'm entering early retirement. By the way, you could pass as twin for New England Patriot's Quarterback, Mac Jones

[@RootFP]

Ha! I haven't gotten that one before but I can see it. I'm glad you're finding the information helpful!

[@keller1334]

The fact that you have to jump through so many hoops to keep what is rightfully yours should be illegal.

[@user-qc8vj3vp9v]

Agreed

[@user-ty2uz4gb7v]

Taxing social security or really any retirement funds is just stupid. I mean the whole point of social security is to provide income for people in retirement and then you're going to turn around and tax it?

[@basehead617]

@@user-ty2uz4gb7vmost people who really need it aren’t taxed on it

[@johnbrown1851]

​@@user-ty2uz4gb7v would be different if the non taxable amount increased with inflation.

[@howellwong11]

I should be so lucky to have a choice of what fund to pull first.

[@rylandcurtis]

It's worth noting that this withdrawal sequence is a general guideline, and there may be exceptions or variations depending on your unique financial situation.

[@janibeg3247]

Taxes are the single largest expense in our retirement.

[@DreamFirms]

Learned a lot!

[@RootFP]

Glad to hear it!

[@BlueBass2]

super helpful, curious how this strategy changes for individuals looking to retire early

[@AlamoDon]

Awesome

[@RootFP]

Thank you!

[@luisabellon5869]

Clear and concise. Hopefully RMD age will be increased as we are now living longer than ever before. ROTH investments are not guaranteed to be tax free, as the fed needs money, they will change the rules, they have already done so! For example, SS payments used to be tax free, not anymore!

[@SteveJC]

It was two of JoJo Cabbage Brain Biden's votes to tax, then later increase the tax, on Social Security which is taken out of paychecks BEFORE taxes. You're right......They'll go after ROTHs next.

[@mikethompson3534]

Government thieves

[@everlastingarms3065]

What you say is spot on regarding only taking from taxable income up to taxable income of $80,250. But as you know, there is the standard deduction (or itemized deductions) that are not included in taxable income. In 2021, the standard deduction for married filing jointly was $21,500, so the real limit isn't $80,250, but closer to $101,750, yes? I'm sure you left that out for simplicity & clarity in teaching purposes so that people understand the best way to pull from various sources of income and to belie the "pull from taxable accounts first" theory that isn't anywhere near as accurate as what you're saying. But there really is more leeway there. Great video, as are all of your videos. So much nonsense out there, but you break down the basic math very well for people.

[@philschiavone101]

I will be a net saver for the first 5 years of my retirement. My plan now is to send small amounts from my 401K to my Roth and pay the taxes now. By the time I need money for health reasons I would be pulling from my Roth.

[@acajudi100]

I do not eat pork, and I dropped Pepsi, and steaks. I like chicken wings, fish, greens, grits, eggs, cheese, potatoes, nuts, Schweppes Ginger Ale, powder milk, cereala,popcorn, chips. , Mazola corn oil,butter, beans. spaghetti, tomato sauce , Louisiana hot sauce, corn bread, coffee ice cream. 96% ground beef. turkey bacon. Corn beef hash, tuna, sardines, soups. crackers, wheat toast. etc, I left the USA in 2021 at 79, for a safer and less expensive country. My expenses are 70% less than the USA

[@patriceingrassia3862]

I really got a lot out of your video as I am looking to retire in 1 year. Could you please always include stats for singles not just married filing jointly- there are a lot of us singles out there thank you for all your hard work

[@stevewoods8116]

Agree with you, I need single information!

[@Joelegs]

I've listened to a fair number of these videos when trying to plan for my retirement. I really liked your content and the manner in which you presented it. I'll need to listen to more of your videos. It would be nice to have some specific scenarios and add in some calculations (or maybe refer to other videos to get that detail). I know that part isn't for everyone, but I tend to get pretty detailed. Regardless, great video and thank you!

[@johngill2853]

Instead of depending on KZbin, just run your own calculation using calculators on internet. You'll find nobody knows your situation like you do

[@Joelegs]

@@johngill2853 I've got a really detailed set of calculations that I use. I've built up all those over years. Working through the math ensures I really know what is going on in the decisions. But that doesn't mean that I don't find learning more about taxes or withdrawal strategies isn't a good idea.

[@johngill2853]

@@Joelegs you are person to figure out your situation. Cookie cutter advice isn't very good in taxes

[@sandraconway]

Hi I have listened to a few of your videos and find the advice very helpful planning for retirement. As a single person going from a twice a month paycheck to SS and a 401k, It’s all extremely overwhelming for me to say the least! I know I will have to change location since Cali living is unaffordable even before retirement! Help please for single people options. Thanks

[@papasquat355]

Everyone needs to understand this. Deferred comp and roth accounts are tax benefit accounts on the front and back end. In draw you would use a calculated combination of taxable and tax exempt to retain the lowest possible tax rate.

[@paulanderson2464]

Sure looks like We'll be switching from an 8hr/day job to 24/7 guard duty on the nest egg... "halt, who goes there? " Hope there's still enough time to enjoy some of it.

[@thomassciurba5323]

The accumulation phase is relatively easy, the draw down phase is very complex.

[@DR.Detroit11]

wow, this nailed my situation almost to a tee

[@RootFP]

Great! I’m glad it was helpful.

[@sandraconway]

Hello, this retirement prep is causing me so much anxiety, but it should be easy-I will be pulling from my 401k, it is my only account! I really wish someone would talk about that!!!!

[@swingman50]

Between social security and 401k and investment accounts I'll have over $100k easily. I'm thinking i should start hitting up the 401k account first while delaying SS to 70 to help later tax wise with RMDs. Currently 66 yr old. Thoughts?

[@ButcherBird-FW190D]

I'd say yes.

[@denniss3980]

In my case I can take up to 12K a year from my pretax IRA and pay zero taxes, I will be doing this and as I don’t need the money right now I will be rolling it over to a Roth

[@jacksummer854]

Begin collecting SS at 70, RMD at 73. Be smart!

[@silverstar4289]

And not collect nearly 100,000 by drawing asap. Not too smart.

[@danielt.3152]

I think he is assuming that one is spending the principal base investment, but if you have the right portfolio you are only spending some of the capital gains and dividends which you take as cash. One other problem I see is the lumpy nature of dividends and capital gains which are weighted toward the end of the year, I think the other challenge is leveling income from your investments over monthly, quarterly, semi annual and annual distributions. Also don’t forget muni bond interest is typically not taxable so you can use that instrument

[@dforrest4503]

I agree. I have a couple Vanguard mutual funds that have significant capital gains and any withdrawals would be at least 50% taxable. So this year (getting closer to retirement) I’m investing the dividends and capitals gains in a new fund. That way if I need to withdraw funds within the next few years the tax hit would be lower.

[@jrcll7856]

i`m 62.. but i`m delaying S/S till i`m 67... and till then i`m drawing from my 401k for my monthly income, thats why i put 12 % and more into my 401k for this reason ... unless you work and get paid under the table...YOUR PAYING TAXES

[@SharonFoster852]

There's a minimum Part B surcharge of approx. $144/month.

[@gstlb]

Very thoughtfully presented. As of now, September 2023, IRA minimum distributions have to begin by April of the year after you turn 73. For example, I was born in 1951, so I turn 73 in 2024 and have to start taking distributions by April 2025, and I will have to keep up with how much I take to make sure I take at least the minimum amount.

[@CheckThisOut77]

I believe you need to take your RMD in April of the year you turn 73.

[@jameswitte5676]

I believe if you wait till the following year to take your first RMD you will be required to take 2 RMD’s that year. 1 for the previous year and 1 for the current year.

[@halaki3]

Nice video ! I’m looking for a fiduciary advisor in California so I can meet in person. I’ve watched ur videos n subscribed. Planning to retire in 2-4 years…

[@RootFP]

Thank you! I’m a fiduciary advisor in San Diego, CA. If you’re in the area I’d be happy to help. Feel free to schedule a meeting from our website - www.rootfinancialpartners.com

[@bingrao2876]

great pointers overall. Thank you! Thinking about early retirement to mobilize and invest my (401)k funds accumulated over the years for two reasons: 1. Hope the self-managed investment return generate greater income than my current salary; 2. Give myself ample time to convert the traditional IRA in my 401k plan to Roth IRA before the RMD hits. Just wondered how much I could convert each year after retirement at age, say, 62, is there a amount like the maximum contribution of $26,000 i'm currently having? Thanks

[@RootFP]

Hi Bing, There's no IRS maximimum amount you can convert. Just keep in mind the more you convert the more you pay in taxes so just be mindful of what your tax bracket is when you're doing this.

[@stevenbernard7991]

Bing, also consider the dollar amount you will pay in taxes and what account you will use to pay those taxes and remember to pay estimated taxes, which you can do at the time of the conversion.

[@rustymcconnell2779]

What about cash in money market or checking accounts being used first to supplement social security before withdrawal of IRA accounts? This allows tax deferred money to continue to accumulate.

[@michaelvadney5803]

Very nice video. Definitely helps in getting to the full picture. Thanks

[@RootFP]

Glad it was helpful!

[@tomj528]

Nice summary of the issues involved but at 9:15 you accidentally referred to a Roth IRA account as tax-deferred. Realize that taxation at any point is driven solely by spending. This "typical" example that "needs" a $100K/year income is nothing but a recipe for taxation on so many of the different levels that you mentioned from LTCG/QD, RMDs and higher medicare premiums not to mention the "Tax Torpedo" and the "Widow's Tax Trap". All of which can easily be sidestepped with a lower "need of money" and tax planning. Imagine how the entire situation changes when rather than trying to minimize taxes you don't settle for anything less than a complete elimination of both federal and state income taxes and because you're spending is low there's even "head room" in your income bracket to do Roth conversions slowly and under taxable limits. Honestly, with a paid off home and no other debt it's surprising how low spending goes and how income can easily be managed to remain tax free.

[@AgathaLOutahere]

I have a quarter million in I Bonds purchased from 2000 to 2004 that because of the high fixed rate offered back then are earning in excess of 11%. They will remain where they are until they mature.