Retirement Withdrawal Strategies
James (age 66) retires in 2026 and is evaluating how to fund his living expenses. He needs $80,000 after tax this year. His available assets include:
- Traditional IRA: $1,000,000 (all pre-tax)
- Roth IRA: $200,000
- Taxable brokerage account: $300,000 (basis $200,000)
Assume:
- Ordinary income tax rate: 24%
- Long-term capital gains tax rate: 15%
- No Social Security income this year
Which of the following withdrawal strategies will MOST LIKELY minimize James’s total tax liability while meeting his $80,000 after-tax need?
- Withdraw the entire $80,000 from the traditional IRA
- Withdraw $80,000 from the Roth IRA
- Withdraw $80,000 from the taxable account
- Withdraw a combination of traditional IRA and taxable account funds
