Planning Walkthrough

Withdrawal Strategy

Build a tax-efficient retirement drawdown plan. Compare conventional vs. Roth-first withdrawal ordering with RMD enforcement and IRMAA flagging.

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Overview

The Three-Bucket Problem

Most retirees have money in three tax buckets: tax-deferred (401k, traditional IRA), tax-free (Roth IRA, HSA), and taxable (brokerage accounts). The order you withdraw from these buckets has a significant impact on lifetime taxes.

The conventional approach (tax-deferred first) isn't always optimal. Withdrawing from Roth accounts first in some years, or combining with pre-retirement Roth conversions, can reduce your total tax bill by tens of thousands of dollars.

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Key Concepts

RMDs and IRMAA

Required Minimum Distributions (RMDs)

Starting at age 73, the IRS requires you to withdraw a minimum percentage from tax-deferred accounts each year. This percentage increases with age. RMDs are fully taxable as ordinary income. Rikdom automatically enforces RMDs in the withdrawal model — you can't skip them.

IRMAA (Income-Related Monthly Adjustment Amount)

If your modified adjusted gross income exceeds certain thresholds, you pay higher Medicare Part B and D premiums. Large withdrawals from tax-deferred accounts can push you over IRMAA thresholds. The tool flags years where this might happen.

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Step by Step

Using the Withdrawal Strategy Tool

1. Navigate to the Tool

Go to Intelligence → Planning → Withdrawal Strategy. Balances auto-populate from linked brokerage accounts.

2. Enter Your Balances

Provide balances for each bucket: tax-deferred, tax-free (Roth), and taxable. Add Social Security income, other retirement income, and your annual spending target.

  • If accounts are linked, balances are pre-filled by tax treatment
  • Include pension, rental income, or part-time work under “Other Income”
  • Annual spending should reflect your expected retirement lifestyle

3. Compare Strategies

The tool simulates two (or three) strategies side by side:

  • Conventional: Draw from tax-deferred first, then taxable, then Roth
  • Roth-first: Draw from Roth first to let tax-deferred grow (or vice versa)
  • With Conversions: Pre-retirement Roth conversions + optimized withdrawals (toggle this on)

4. Read the Results

The comparison chart shows lifetime tax by strategy. The year-by-year table breaks down withdrawals, taxes, and remaining balances. Look for the strategy with the lowest total tax over your retirement.

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Pro Tips

Pro Tips

  • •Roth conversion ladder: Enable the “Include Roth Conversions” toggle to model converting a fixed amount each year before retirement. This shifts money into the tax-free bucket while you're still in a lower bracket.
  • •Tax bracket management: The goal isn't zero taxes — it's consistent, predictable taxes. Filling up the 12% bracket every year beats alternating between 0% and 32%.
  • •Watch IRMAA thresholds: Large withdrawals in a single year can trigger Medicare surcharges. Spreading withdrawals evenly avoids the spikes.

Build your withdrawal plan

See which withdrawal order minimizes your lifetime tax bill.

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