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Which account should I draw from first, my 401(k) or Roth IRA?

When I retire I will have a pension, Social Security, 401(k), and Roth IRA as sources of income. My pension and Social Security will cover most of my living expenses, but not all. To make up the difference, which account makes the most sense to draw from first, my 401(k) or Roth IRA?

Retirement, Pensions, Social Security, 401(k), IRAs, Retirement Plans
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April 2018

In general, if you do not anticipate needing your Roth IRA savings now or in the future for retirement income, it makes sense to leave that alone since unlike your 401k, the IRS will not require you to take minimum distributions from the Roth at age 70 1/2. Thus you will be able to let that grow tax deferred and tax free to your heirs or charity. 

On the otherhand, depending on your circumstances, you may want to consider taking distributions from your Roth IRA sooner to manage your taxes in retirement. For example, in the event your 401k distribution is putting you into a higher tax bracket, or causing Social Security to be taxed, or causing your Medicare premium to go up (surcharge), consider taking tax-free distributions from your Roth IRA instead of the 401k to prevent undesirable tax consequences. 

Tax management in retirement can be complicated and is often overlooked. Depending on your situation, consider consulting with a qualified tax planner. 

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