Managing and Understanding Retirement Withdrawals

Written by Canty Financial - Published on April 25, 2024

Retirement planning is a crucial aspect of financial health, and understanding how to manage your retirement withdrawals can make a significant difference in your financial security during your later years. This newsletter will explain the rules regarding when you can begin withdrawing from various retirement accounts, discuss detailed retirement withdrawal strategies, provide updates to required minimum distributions (RMDs), and look at how to integrate these withdrawals with other income sources.

When Are You Allowed to Take Withdrawals?

Each type of retirement account has specific rules for withdrawals:

  • IRAs (Traditional and Roth): You can make penalty-free withdrawals from the age of 59½. Roth IRAs allow you to withdraw contributions at any time tax and penalty-free, but earnings are subject to the same age rule as traditional IRAs.
  • 401(k)s and 403(b)s: Withdrawals are allowed from age 59½ without penalties, with some plans having special considerations if you terminate service prior to this age.
  • Thrift Savings Plan (TSP): Like the others, the TSP allows for withdrawals from age 59½. There are also exceptions to this rule which allow withdrawals from age 50 to 55 penalty-free if you meet certain criteria.
  • Deferred Compensation Plans (457 plans): These plans are unique, allowing for penalty-free withdrawals once you leave the employer, regardless of age.

Retirement Account Withdrawal Strategies

Choosing a strategic approach to withdrawing your retirement funds can help ensure that your savings last throughout your retirement. Many withdrawal strategies evolve over time as needs and life changes occur:

  1. The 4% Rule: This strategy involves withdrawing 4% of your total portfolio each year of retirement. This approach is designed to balance income needs with the goal of maintaining capital longevity over approximately 30 years.
  2. Equal Systematic Payments: Under this method, you withdraw the same amount periodically, whether monthly or annually. This strategy offers predictability but does not account for changes in personal expenses or inflation.
  3. Dynamic Strategies: These strategies adjust your withdrawal amounts based on specific factors such as economic conditions, market performance, or changes in personal financial needs. They often include:
    • Dynamic Spending Rules: Adjust withdrawals based on portfolio performance. If investments perform well, you might increase withdrawals slightly, and vice versa.
    • Guardrails: Establish upper and lower limits on withdrawals to ensure the portfolio isn't depleted too quickly during downturns or overly conserved during upturns.
  4. Bucket Strategies: This involves dividing your retirement funds into different 'buckets' assigned to different periods of your retirement. For example, the first bucket might contain cash for immediate expenses, the second might be invested in bonds for medium-term needs, and the third in stocks for long-term growth.

Required Minimum Distributions (RMDs)

Recent legislative changes have altered the age at which RMDs must begin from age 72 to age 73 and eventually age 75:

  • The Secure Act 2.0 increased the age at which RMDs begin. For individuals who turn 73 in 2024, their first RMD will be in 2024. This will increase to age 75 in 2033.

Failing to meet RMD requirements can lead to significant penalties, including a 25% excise tax on the amount that should have been withdrawn. It’s crucial to incorporate RMDs into your withdrawal strategy to avoid these penalties and to optimize your tax liabilities.

Coordinating Withdrawals with Other Income Sources

Many retirees will also receive income from Social Security, pensions, or may even continue to work part-time. Strategically integrating these sources with your withdrawal plan can help manage your tax bracket each year and provide a balanced approach to generating retirement income. For example, you might delay taking Social Security benefits to maximize the monthly payout, relying more on personal savings in the early years of retirement.

Another example of coordinating your withdrawals with other retirement income sources involves strategically timing the withdrawal of funds from tax-deferred accounts (like traditional IRAs or 401(k)s), taxable accounts (individual or joint brokerage accounts), and tax-exempt accounts (like Roth IRAs) to manage tax liabilities effectively.

For instance, if a retiree expects a higher taxable income in a particular year—perhaps due to selling a property or receiving a large payout from an investment—they might choose to withdraw less from their tax-deferred accounts to stay in a lower tax bracket and instead use funds from their Roth IRA, which can be withdrawn tax-free. This strategy helps minimize the overall tax burden by balancing the types of withdrawals to take advantage of lower tax rates in other years.


Managing retirement withdrawals effectively involves understanding the rules that apply to your accounts, choosing a strategic approach to withdrawing funds, being aware of recent changes to RMDs, and coordinating these withdrawals with other income sources. We regularly consult with our clients to determine the most appropriate strategy for their specific situation, ensuring their retirement funds are managed wisely.

If you have any questions about your retirement withdrawal strategy, please feel free to reach out to us.

Thank you for reading,
The Canty Financial Team

Bill Canty, CFP®, CPA, Financial Planner

Ed Canty, CFP®, Financial Planner

Joe Canty, CFP®, Financial Planner

Tina Alteri, CPA, Tax Advisor

Maureen Walsh, EA, Tax Advisor

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