The hardest financial skill in your life is the one nobody taught you: turning a pile of savings into a monthly income you can rely on. Sequencing, taxes, and coordination are where it lives or dies.
For thirty or forty years, the question was how to save. Every payroll cycle, a portion was carved off before you saw it, invested somewhere, and left to compound. The mechanics were mostly automatic. Even the harder decisions, like which fund to pick or how much to contribute, were bounded and repeatable.
Then, in a single Friday, the question flips. The saving stops. The spending begins. And the skill you spent three decades building, “put money in and let it grow,” is no longer the skill that matters. The skill that matters now is one nobody taught you: how to take money out.
That skill has three moving parts, and each of them, in isolation, is subtle. Together, they are the reason most retirees who have “enough” still can’t confidently answer the question, “how do I actually use my money?”
The Skill No One Taught
Saving is a habit. Drawing income from a portfolio is a decision, made every year, involving every account you own, every income source you have coming in, every tax bracket you touch, and every person who depends on the outcome. There is no autopilot for it.
Most retirees we meet arrive at the first income-strategy conversation with some version of this plan: “I’ll just take money out of my brokerage account when I need it, and eventually start drawing from the IRA when I have to.” That plan is not wrong exactly. It is default. And in retirement-era finance, default is often expensive.
Why Default Withdrawals Cost You
Default withdrawal strategies fail in two ways, both quiet. First, they don’t optimize taxes across the years, only within them. A retiree who pulls $80,000 from their IRA every year is treating that account like a checking account. It isn’t one. That $80,000 fills a specific bracket. In some years, another $30,000 could be pulled at the same low bracket. In other years, even the $80,000 pushes into a higher one. A default withdrawal doesn’t see any of that.
Second, default strategies leave money on the table by ignoring the interactions. The IRA withdrawal drives Medicare premiums two years later. The brokerage sale creates capital gains that stack on top of the IRA distribution. The Social Security check becomes more taxable as other income rises. Each of those effects is small on its own and can compound over a thirty-year retirement. The dollars spent invisibly in taxes that could have been avoided rarely show up on any single statement, which is part of why the default is so easy to fall into.
Three Problems to Solve
An income strategy that actually works has to solve three connected problems at once. Not one at a time. Together.
Sequencing. Which account gets touched first, and in what order, over the years?
Taxes. How is each year’s taxable income shaped, given the accounts you are drawing from and the ones you are letting grow?
Coordination. How does the withdrawal plan interact with Social Security, Medicare, RMDs, and everything else that has its own timing?
Each of these deserves a closer look, because most retirees have never seen them named this way.
Sequencing: Which Account First
Most retirees have three types of accounts: taxable brokerage assets, tax-deferred IRAs and 401(k)s, and Roth accounts. The old rule of thumb was to draw from the brokerage first, then the IRA, then the Roth. That rule is a starting point, not an answer. It leaves substantial value on the table for most households.
A better sequence uses the low-income years early in retirement to accomplish two things at once: withdraw enough from tax-deferred accounts to fill your low tax brackets, and convert some of the remainder to Roth. That way, when RMDs eventually begin at 73, the tax-deferred account is smaller, the RMD is smaller, and the higher-bracket problem never fully arrives.
The right sequence for any given household depends on account balances, expected spending, Social Security timing, and health assumptions. What matters is that a sequence has been chosen, on purpose, in writing, rather than defaulted into.
Taxes: The Lifetime Game
Tax planning at your CPA’s office is a one-year game. Tax planning in retirement is a thirty-year game, and the two are not the same.
A one-year game asks: how do I minimize taxes this year? A thirty-year game asks: how do I minimize taxes across every year of retirement, including the years I haven’t reached yet?
The answers are often opposite. The one-year game says: convert nothing, distribute nothing, keep this year’s taxable income low. The thirty-year game says: fill your low brackets deliberately in the low years, because the alternative is being forced to fill higher brackets in the RMD years. Paying tax voluntarily now, in the 12% bracket, can save you from paying involuntarily later in the 24% bracket.
A coordinated strategy often involves paying slightly more tax in the low-income years of retirement, in exchange for reducing the tax bill in the higher-bracket RMD years. Whether that tradeoff makes sense for any specific household depends on the details, which is why we always model it individually before recommending it.
Coordination: The Moving Pieces
Income strategy touches almost everything else in a retirement plan. That is not a complication to work around. It is the point.
Coordination with Social Security means the claim date is chosen with the withdrawal plan, not against it. Delaying Social Security while drawing more from a tax-deferred account in the sixties opens the Roth conversion window and produces a larger, more inflation-protected Social Security benefit later.
Coordination with Medicare means the IRMAA surcharge is watched two years in advance, because the income you produce today drives the Medicare premium you pay in two years. Cross an IRMAA threshold by a single dollar and the premium jumps. A coordinated strategy plans around the thresholds. A default strategy trips over them.
Coordination with RMDs means the tax-deferred account isn’t allowed to compound into a shape it can’t gracefully exit. If nothing is drawn from the IRA in the sixties, the RMD in the seventies can be twice what the household was planning to spend. Coordination smooths this out over a decade.
Coordination with legacy means the assets a household intends to leave to heirs are placed in the right accounts. Roth dollars pass to the next generation more efficiently than IRA dollars. Which account holds the growth matters.
None of these are separate conversations. They are one conversation, run in four directions.
Same Portfolio, Different Outcomes
Consider two hypothetical households, both retiring at 65 with $1.5M split roughly evenly between a taxable brokerage account, a traditional IRA, and a Roth. Both plan to spend $80,000 a year, in addition to Social Security.
The first household follows the default. They draw from the brokerage first, delay all IRA withdrawals until RMDs force them, and claim Social Security at 65. Their sixties look calm. Their seventies bring an RMD they weren’t planning for, Medicare premium surcharges they didn’t anticipate, and a higher tax bill than they had assumed. Over thirty years, they leave the equivalent of a mid-six-figure amount to the IRS that they didn’t have to.
The second household runs a coordinated sequence. They delay Social Security to 70. They spend from the brokerage account modestly, and from the IRA deliberately, filling their low brackets in the sixties. They convert a portion to Roth each year. RMDs, when they arrive at 73, are notably smaller. The Medicare premium surcharge is avoided. Their after-tax spending capacity across the thirty years is higher, meaningfully.
Same portfolio. Same spending. Different order. Different outcome.
The T.O.W.N. Framework
This is why we run the process the way we do at Townsend. Sequencing, taxes, and coordination are not skills you master once. They are decisions revisited every year of retirement, and the framework we hold ourselves to is what keeps that discipline in place.
T is for Trust. Relationships begin with listening, transparency, and a fiduciary promise to put your interests first.
O is for Oversight. In-house management, ongoing monitoring, and proactive adjustments help keep your plan aligned as life changes.
W is for Wisdom. Decades of guiding families through calm and uncertain markets, paired with education that helps you make informed decisions.
N is for Navigation. A personalized roadmap that connects where you are today to where you want to be, including income, investments, taxes, health care, and legacy.
For an income strategy specifically, Navigation and Oversight are the pillars that carry the most weight. Navigation is the written, coordinated map. Oversight is the annual re-examination of every decision in light of what has actually happened since the last one. Together they turn a savings pile into a paycheck you can rely on for the next three decades.
A Place to Start
If you have arrived at retirement with meaningful savings and no written income strategy, you are not alone. The default is the most common starting point we see. It is also the most expensive one.
A complimentary income-strategy review with a Townsend CFP® professional is the simplest way to see what a coordinated withdrawal sequence would look like for your household, and what it would be worth over the life of the plan. There is no obligation, no product pitch, and no follow-up unless you ask for one.
Coloradans have trusted us with that conversation since 1990. We’d be glad to have it with you.
Schedule a complimentary plan review →
Frequently Asked Questions
Q: I’m already retired and taking withdrawals from my brokerage account. Have I made a mistake?
A: Not necessarily. What matters is whether the strategy still fits the years ahead. Many households arrive at us with a sensible starting default and then benefit substantially from adjusting the sequence for the remaining decades. We start with where you are, not where we wish you had been.
Q: How much can a coordinated income strategy really be worth?
A: The potential value of coordination varies significantly by household. It depends on your account mix, your tax picture, your Social Security timing, and how long the plan will run. Rather than promising a specific dollar outcome, we model the difference between coordinated and default approaches for your household so you can see the projected impact for your own situation.
Q: I have a CPA who does my taxes. Isn’t this their job?
A: Your CPA is doing exactly what they are trained to do: optimize the return in front of them. Multi-year income planning is a different discipline. Most CPAs will tell you the same thing. We work alongside CPAs, not around them, and the strategy we build usually makes their annual work easier, not harder.
Q: How often does the strategy get revisited?
A: At least annually, and sooner whenever something material changes: a large expense, a health event, a market move that shifts the projection, or a change in tax law. The plan is not a document that gets filed. It is a document that gets updated.
Q: What about Roth conversions? How do I know if I should be doing them?
A: Roth conversions are one of the largest single value drivers in retirement-era planning for households in the right tax situation, and one of the most common regrets for households that missed the window. Whether they make sense depends on your specific brackets, your projected RMDs, your legacy goals, and your Social Security timing. It is a specific question with a specific answer, and it is one we always run the math on.
Q: We haven’t retired yet. Is it too early to be having this conversation?
A: No. The most valuable version of this conversation happens two to five years before you stop working, because it changes what you do with the last few years of earnings, contributions, and account structure. The households we help most are usually the ones who came in early.
Important Disclosure
This material is provided for informational and educational purposes only and should not be construed as individualized investment, legal, or tax advice. Examples are hypothetical and for illustrative purposes only. Actual results will vary based on individual circumstances, market conditions, and future tax laws.
