Is There Room Left in Your Tax Bracket?
In the early retirement years, before Social Security and required withdrawals start, there’s often empty space in a low tax bracket. Filling it on purpose can lower the taxes you pay over time.
I have some version of this conversation almost every week. Someone sits down with me, newly retired or a year or two out, with money in three places. A brokerage account, a traditional IRA or 401(k), and usually a Roth. They ask which one to live on first, and most already have an answer in their head from something they read. Spend the brokerage account first, then the IRA, and save the Roth for last.
It’s a clean rule. And for a lot of couples, it quietly hands the IRS thousands of dollars they never owed.
Walk through it with me. Say you both retire at 63 with $1.2 million in a traditional IRA, $400,000 in a brokerage account, and $150,000 in a Roth. Social Security hasn’t started. You need about $80,000 a year to live on, and if you don’t know that number yet, figure out what you’ll spend in retirement first, because the whole plan rests on it.
The IRS won’t make you start pulling from that IRA until your required age, which is 73 if you were born before 1960, and 75 if you were born in 1960 or later. For most people retiring in their early 60s today, that’s 75, so the account can sit and grow for more than a decade. Spend the brokerage account down first and the IRA grows untouched the whole time, until the year you hit that age and the government makes you start taking money out whether you need it or not. Those required withdrawals can run $60,000 a year or more, they pile on top of your Social Security, and by then you’ve lost the room to do much about the tax bill.
I call the years in between, from the day you stop working to the year those withdrawals start, your golden years. Your income is the lowest it will ever be, and most people let those years slip by without using them. In 2026, a married couple can have about $130,000 of income, after the standard deduction, and still stay in the low 12% tax bracket. If you’re living on $80,000 from the brokerage account and showing little else on your tax return, you’ve got a big, empty stretch of that 12% bracket going to waste.
That empty space is the opportunity. Instead of leaving the IRA to grow into a tax problem later, you take money out of it now on purpose, or convert a piece to your Roth, filling that low bracket while you’re sitting in it. The difference, in plain numbers: pull $50,000 out of the IRA at 12% and the tax is about $6,000. Leave it, and that same $50,000 can come out later at 22%, once Social Security and the required withdrawals are both running, for a tax of about $11,000. Same money, nearly double the tax for waiting.
And this isn’t a plan you build once and file away. The brackets move, the rules change, and your life does too, so the smart move shifts a little from one year to the next. Some years you fill more of the bracket, some years less.
So when someone asks me which account to spend first, my real answer is that the order is its own decision, worth mapping out and keeping current, not a rule of thumb you set once and forget. If you’re in your golden years now, or you can see them coming, it’s worth a look before December, while this year’s room in the bracket is still open. That kind of year-by-year planning is the heart of what we do inside a Money Roadmap, and it’s why the clients we work with come back to it with us every year.
