How to Turn Your Savings Into a Reliable Retirement Paycheck.

You have run the numbers, talked with family and friends, and made the decision: you are ready to retire. That is great news! Now comes the question: Where will my paycheck come from?

For many retirees, income comes from several sources: Social Security, a pension, a taxable brokerage account, an IRA or 401(k), a Roth IRA, or even perhaps inherited assets. Each account has different tax rules. Deciding how much to withdraw from each account can have a meaningful impact on your taxes over your lifetime.

The Mechanics Are Usually the Easy Part

Once you decide where the money should come from, setting up transfers from your investment accounts to your checking account is actually pretty simple. Your custodian can typically set up automatic deposits at any frequency you’d like, in any amount you’d like, and withhold taxes so you don’t have to worry about it.

The difficult part is not moving the money. It is determining how much to take from each type of account and when to take it.

The Traditional Withdrawal Order

A common rule of thumb is to withdraw money in the order:

1. Taxable brokerage accounts

2. Tax-deferred accounts, such as a Traditional IRA or 401(k)

3. Tax-free accounts, such as a Roth IRA

   
   

The logic is that tax-deferred and tax-free accounts should remain invested so their tax advantages can continue as long as possible. There is nothing inherently wrong with this approach, but it can be too simplistic.

For example, a withdrawal from a brokerage account is not automatically tax-free. Part of the withdrawal may be a return of your original investment, while realized gains may be taxable. More importantly, emptying one account before touching another may create tax problems later.

The goal should not be to follow a rigid order. It should be to coordinate your spending needs with taxes over your lifetime.

Why Tax-Deferred Accounts Deserve More Attention

Withdrawals from Traditional IRAs and 401(k)s are generally taxed as ordinary income. These accounts are also subject to required minimum distributions, or RMDs. Under current federal law, RMDs generally begin at age 73, although the starting age can depend on your birth year and type of retirement plan.

RMDs are calculated using the account balance at the end of the prior year and an IRS life-expectancy factor. A larger balance will usually create a larger required distribution. That can increase future taxes, make more of your Social Security taxable, raise Medicare premiums, or push other income into a higher tax bracket.

That is why the early years of retirement can be valuable. If your income is temporarily lower before RMDs begin, you may be able to move money out of the tax-deferred accounts at a favorable tax rate through Roth conversions or planned withdrawals.  

Roth accounts can be especially useful because qualified withdrawals are tax-free. They can also provide flexibility in years when another IRA withdrawal could create an unwanted tax consequence. That just means Roth money should be used strategically rather than just being last in order.

Use Lower Income Years Deliberately

One approach is to estimate your taxable income each year and identify how much room remains in your current tax bracket. For 2026, the 12% federal income tax bracket for married couples filing jointly ends at $100,800. The standard deduction is $32,200.

Those numbers require an important distinction: taxable income is not the same as the amount of cash flowing into your household. Social Security may be partially taxable, brokerage withdrawals may include cost basis and gains, and deductions reduce taxable income.

The purpose of tax bracket planning is not to chase a particular number. It is to use lower income years intentionally rather than allowing a large tax-deferred balance to grow without considering the future tax bill.

A Simplified Retirement Example

Consider John and Jane, a married couple with the following accounts and income needs:

Item	Amount
Taxable brokerage account	$100,000
Traditional IRA	$750,000
Roth IRA	$350,000
Total invested assets	$1,200,000
Annual spending need after taxes	$96,000
Annual Social Security income	$48,000
Net annual spending gap	$48,000

John and Jane need $48,000 per year from their investments after taxes. If that money comes entirely from their traditional IRA, the gross distribution will need to be more than $48,000 because tax would be withheld. A rough planning estimate might be to distribute approximately $55,000, but the exact amount would depend on several factors including the state income tax rate, the taxable portion of Social Security, and their deductions.

After projecting taxable income, John and Jane may discover that they still have room remaining in the 12% tax bracket. They could consider converting an additional amount from the Traditional IRA to the Roth IRA. Alternatively, they could use a combination of IRA and brokerage withdrawals if that produces a better result.

The recommendation should not be, “Always use the IRA first” or “Always spend the brokerage account first.” The better question is, “What combination gives us the income we need while managing taxes over the rest of our lives?”

Turn the Strategy into a Paycheck

Once the withdrawal strategy is established, you make retirement income feel much like a regular paycheck. Set up automatic transfers to your checking account, withhold taxes where needed, and keep enough cash or short-term investments available so you are not forced to sell long-term investments during a market downturn.

The plan should be reviewed at least annually. Tax brackets change, account balances move, spending needs increase or decrease, and new opportunities may arise for Roth conversions, charitable distributions, or capital gains planning.

A reliable retirement paycheck rarely comes from a single account. It usually comes from a coordinated mix of Social Security, pension income, cash reserves, taxable investments, and retirement accounts. The right mix is the one that supports your lifestyle today while preserving flexibility for the years ahead.

If you are not comfortable making these decisions on your own, consider working with a financial advisor or financial planner who can evaluate your situation and develop a withdrawal plan specifically for you.

Important considerations: This example is simplified and is intended for educational purposes. The appropriate strategy may change based on age, filing status, the taxability of Social Security, cost basis and capital gains, Medicare income-related surcharges, health-insurance subsidies, charitable giving, inherited-account rules, state and local taxes, and changes in tax law.

Source note: 2026 federal tax-bracket and standard-deduction figures are from the Internal Revenue Service. RMD information is based on current IRS guidance. Figures and rules should be reviewed and updated as laws change.