Rethinking the “Roth Last” Rule
When the Order of Retirement Withdrawals May Not Matter at All
New post: Rethinking the “Roth Last” Rule — My new analysis shows that when you hold after-tax spending constant and ignore RMDs or tax changes, it hardly matters whether retirees spend Roth or traditional assets first. The timing “rule” experts debate may be largely irrelevant—until real-world frictions kick in.
When the Order of Retirement Withdrawals May Not Matter at All
For decades, financial planners have preached a simple rule:
Spend taxable money first, traditional IRA/401(k) next, and touch the Roth last.
The logic: Roth money grows tax-free, so don’t spend it until you must.
But a time-value-of-money lens tells a different story.
If deferring taxes is good, then perhaps retirees should avoid taxes altogether early on—withdrawing just enough from traditional accounts to use the standard deduction and funding the rest from the Roth.
Key Findings
Expert consensus: Spend traditional assets before Roth to preserve tax-free growth.
Modeled reality: With equal starting balances and constant real after-tax consumption, both Roth-first and traditional-first strategies last about 22 years.
Interpretation: Roth-first looks better early (lower taxes, higher mid-retirement balances). But once the Roth is gone and the retiree must draw fully from traditional accounts, the higher taxable withdrawals erase the advantage.
Bottom line: Without RMDs, tax-rate shifts, or other real-world wrinkles, the timing of Roth vs. traditional withdrawals makes almost no difference.
Why It Still Matters in Practice
The real world is never friction-free.
RMDs, Medicare surcharges, and Social Security taxation can punish Roth-first retirees later.
Married vs. single filing changes brackets and creates the “widow’s penalty.”
Mortgage debt, healthcare costs, and estate goals can all shift which account is best to spend first.
Conclusion
In a perfect lab setting—steady inflation-adjusted spending, fixed tax rates, no RMDs—the difference between “Roth-first” and “Roth-last” nearly disappears.
But real life isn’t a lab. Taxes change, spouses die, and spending patterns evolve.
That’s when timing really starts to matter—and where future modeling can show how everyday realities reshape the retirement withdrawal puzzle.
Authors Note: David Bernstein, a retired economist, is the editor of the blog Economic and Policy Insights, a blog that includes frequent posts about the consequences of student debt.If you’d like to support this work — and receive premium posts, working drafts, and early access to new analyses — I’m offering two introductory options:
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