How to Structure Retirement Withdrawals for Long-Term Financial Preparedness

Transitioning into retirement brings one of the biggest financial shifts of your life: turning the savings you’ve built into income you can live on. Without a steady paycheck, it’s important to structure retirement withdrawals in a way that supports your lifestyle and helps your savings last.

There’s no single formula that works for everyone. Instead, a personalized withdrawal strategy can help you draw income from different sources in a thoughtful and intentional way.

Start With a Clear Picture of Your Income Needs

Before deciding where to withdraw from, it helps to understand what you’re withdrawing for. Review your monthly and annual expenses and group them into key categories:

Essential expenses: housing, utilities, groceries, insurance, healthcare
Lifestyle spending: travel, dining, hobbies, gifts
Contingency costs: home repairs, family support, unexpected healthcare

Knowing your baseline income needs helps determine how much to withdraw, when, and from which accounts.

A structured approach can help support your goals without increasing the risk of overspending or withdrawing too much too soon.

Understand Your Income Sources

Retirement income often comes from a combination of sources:

Social Security
Pensions or annuity payments
Traditional IRAs or 401(k)s
Roth IRAs
Taxable investment accounts
Health Savings Accounts (HSAs)

Each source has different tax characteristics and withdrawal rules. For example, traditional IRAs are subject to Required Minimum Distributions (RMDs), while Roth IRAs are generally tax-free if qualified. HSAs can also be used tax-free for qualified medical expenses.

Structuring withdrawals with these rules in mind can help reduce unnecessary taxes and create more flexibility throughout retirement.

Sequence Withdrawals to Support Tax Efficiency

How and when you withdraw can affect how much of your income is taxed each year. Many retirees benefit from using a combination of accounts to manage their taxable income.

One common approach is to withdraw from taxable accounts first, followed by tax-deferred accounts, and then Roth accounts later. This strategy may help keep your tax rate more consistent over time, especially before RMDs begin at age 73 (or 75 for some).

However, your specific sequence may depend on several factors, including your Social Security filing age, healthcare subsidies, and income needs. This is where a personalized strategy can offer clarity.

Understanding a “Bucket” Strategy

A “bucket” strategy divides your savings into short-, medium-, and long-term pools based on when you expect to use the money:

Short-term bucket: Covers the next 1–2 years of income needs. Often held in cash or very low-risk investments.
Medium-term bucket: Funds you’ll need in 3–5 years. Typically includes more conservative investments.
Long-term bucket: Money that can remain invested for 5+ years to support growth and hedge against inflation.

This approach may help you manage market volatility, but it’s important to remember that selling long-term investments at an inopportune time is always a risk. It also brings peace of mind by giving you a clearer roadmap for spending and investment management.

Plan Around Required Minimum Distributions

If you have traditional retirement accounts, RMDs are a key part of structuring your withdrawals. Once you reach the required age, you must begin taking withdrawals each year—or face a significant tax penalty.

These withdrawals can push your income higher, potentially affecting tax brackets, Medicare premiums, and other financial elements.

Planning in advance—such as using Roth conversions or drawing down tax-deferred accounts before RMDs begin—can help smooth out your income over time and provide more control over your tax picture.

Keep Your Plan Flexible Over Time

Even the best-structured plans need to evolve. Market performance, inflation, healthcare needs, or personal priorities can change what you need from your withdrawal strategy.

Set aside time to review your plan annually. Consider:

Have your income needs changed?
Are you approaching or passing key age milestones (such as 65, 73, or 75)?
Do your investments still match your withdrawal timeline?
Are you drawing income in a tax-conscious way?

Adjusting your plan regularly keeps it aligned with your goals and helps you make informed decisions along the way.

Work With a Fiduciary Advisor

Structuring retirement withdrawals involves more than just math. It’s about aligning your resources with your goals, your tax situation, and your desired lifestyle. A fiduciary advisor can help you evaluate different strategies and choose a path that fits your specific circumstances.

This might include reviewing withdrawal sequences, identifying opportunities for Roth conversions, or coordinating your investment and income plans so they work together—not at odds.

Supporting a Retirement Built Around You

Your savings are meant to support your life—not the other way around. When you structure retirement withdrawals with care, you help create consistent income, reduce the impact of taxes, and gain more flexibility to make choices that reflect what matters most to you.

At BA Schrock, we work with clients to build withdrawal strategies that support long-term goals and adapt to life’s changes. Whether you’re approaching retirement or looking to refine your existing plan, we’re here to help.