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:

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:

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meet RMD requirements can lead to significant penalties, including a 25% excise tax on the amount that should have been withdrawn.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

Retirement marks a significant transition in life, offering the promise of relaxation, exploration, and pursuing passions long put on hold. However, achieving the retirement of your dreams requires careful financial planning. One of the critical steps in this journey is estimating the amount of money needed to generate sufficient income during retirement while also optimizing for tax planning.

Estimating Your Retirement Income

As you embark on retirement planning, diversifying your income sources becomes pivotal. Consider the following key income streams:

Investment Accounts

Your investment accounts, including IRAs, 401(k)s, TSPs, deferred compensation, and brokerage accounts, can form the foundation of your retirement income. A popular guideline is the 4% rule, which suggests withdrawing 4% of your total retirement savings annually. For example, if your savings amount to $1 million, this rule indicates an annual withdrawal of $40,000.


For those fortunate enough to have pensions, they provide a reliable income stream. Pensions are typically determined by your years of service and average salary.

Interest and Dividends

Interest from bonds and dividends from stocks contribute to a steady income. Creating a balanced portfolio with growth-oriented and income-generating assets is essential for consistent returns.

Social Security Benefits

Social Security will also play a role in retirement income. Timing is crucial – delaying claiming benefits until full retirement age or beyond can yield higher monthly payments.

Part-Time Opportunities

Many retirees explore part-time work or side gigs to bolster income and keep engaged. These activities can offer both financial benefits and personal fulfillment.

Understand Your Spending: The First Step

Before assessing your retirement income needs, it's crucial to understand your spending habits. Tracking your current expenses forms the foundation of creating a realistic retirement budget. Account for all monthly and yearly expenditures, including housing, utilities, healthcare, transportation, leisure activities, and potential travel.

Creating a Retirement Budget

Your newfound insight into spending lays the groundwork for crafting a comprehensive retirement budget. This budget should align with your envisioned lifestyle. Consider these factors:

Essential vs. Discretionary Expenses

Distinguish between essential expenses (housing, healthcare) and discretionary spending (travel, entertainment) to allocate funds effectively.

Accounting for Inflation

Incorporate an inflation rate into your budget to ensure future income covers rising costs over time.

Contingency Planning

Building a contingency fund within your budget prepares you for unforeseen expenses that may arise during retirement.

A Living, Breathing Plan

Remember, life is fluid, and so should be your budget. Regularly review and adapt your budget as circumstances evolve.

Calculating Your Retirement Nest Egg

To approximate the funds you'll need for retirement while optimizing for tax planning, follow these guidelines:

Estimate Annual Retirement Expenses: Using your budget, calculate the annual funds needed to maintain your desired lifestyle.

Assess Income Sources: Calculate expected income from investments, Social Security, pensions, and potential part-time work.

Determine Shortfall: Deduct expected annual income from projected expenses to identify your financial gap.

Incorporate Tax Planning: Strategically withdraw funds from your retirement accounts to minimize your tax impact. We regularly help our clients optimize for tax-efficient distribution strategies out of tax-deferred, taxable, and tax-free investment accounts.

Try Applying the 4% Rule: Divide your financial gap by 0.04 (4%) to get a rough estimate of the total retirement savings required.

Plan for Longevity: With rising life expectancies, ensure your savings support you through extended retirement years and the potential need for long-term care.

Tax Optimization: A Crucial Component

Optimizing your retirement income includes strategic tax planning. Minimizing your tax liability when tapping your retirement nest egg is a key factor in helping to ensure that you don’t outlive your money in retirement. Planning around withdrawals, required minimum distributions, pension income or income from employment can help determine which accounts to tap in which order. Here are key strategies to consider:

Tax-Efficient Withdrawals/ Distributions

Strategically withdrawing funds from different types of retirement accounts can minimize your tax liability. This is one of the most common areas where we help our clients who are in retirement. By carefully balancing withdrawals from taxable, tax-deferred, and tax-free (Roth) accounts, you can minimize your taxable income in retirement and reduce your overall tax burden.

Consider Tax-Optimized Investments

Invest in assets that have historically generated tax-efficient returns. For example, index funds and ETFs tend to generate fewer capital gains distributions compared to actively managed funds, potentially resulting in lower tax liabilities.

RMD Planning

Understand the rules around Required Minimum Distributions (RMDs) from retirement accounts like IRAs, 401(k)s, TSP, and Deferred Comp. Failing to take RMDs on time can result in substantial tax penalties. Strategically planning your withdrawals can help minimize the impact of RMDs on your taxable income.

Healthcare Savings Strategies

Exploring tax-advantaged healthcare funding options like Health Savings Accounts (HSAs) can help you manage healthcare costs in retirement while providing potential tax benefits. HSAs offer triple tax advantages: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free.

Tax-Loss Harvesting

Implement tax-loss harvesting to offset capital gains with capital losses in your investment portfolio. This strategy can help minimize your tax liability on investment gains.

Tax-Efficient Charitable Giving

Explore ways to optimize your charitable giving to maximize tax benefits. Donating appreciated securities, using donor-advised funds, and considering Qualified Charitable Distributions (QCDs) are strategies to explore.

Timing of Social Security

Deciding when to begin claiming Social Security benefits can have a substantial impact on your taxable income during retirement. Consult with us to determine the most tax-efficient timing for claiming your benefits.

Estate Planning Considerations

As part of your overall tax strategy, consider how your estate will be passed on to heirs. Estate tax laws can impact the transfer of wealth, and careful estate planning can help minimize tax burdens for your beneficiaries.


Preparing for retirement is a journey that requires meticulous planning and careful consideration. By estimating your retirement income needs, crafting a realistic budget, and optimizing for tax planning, you can create a secure financial foundation for your life in retirement. Please feel free to reach out to us to develop a retirement income plan, we regularly help clients develop a retirement plan that is optimized for tax efficiency.

Bill Canty, CFP®, CPAFinancial Planner

Ed Canty, CFP®, Financial Planner

Joe Canty, Financial Planner

Maureen Walsh, EA, Tax Advisor

Tina Alteri, CPA, Tax Advisor

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