'I find that advice questionable': Is it time to rethink the myth of tapping your Roth last - before your 401(k) and IRA?

By Quentin Fottrell

 'I've read this advice again and again' 

 "Why would I go through all the effort of building a large Roth nest egg and then not use it strategically?" (Photo subject is a model.) 

 Dear Quentin, 

 I've read this advice again and again: In retirement, withdraw first from your brokerage account, then your 401(k) and/or IRA, and finally your Roth. As for my regular brokerage account, I tend to think of it more as a backup emergency fund. If I deplete my primary emergency savings and need additional funds, it's there. 

 I can understand evaluating this strategy each year, but the way it's often presented suggests doing it in that strict order until each account is depleted. I find that advice questionable. Why would I go through all the effort of building a large Roth nest egg and then not use it strategically to help keep my taxable income lower throughout retirement? 

 For example, let's say I'm retired and need an extra $10,000 for something - travel, for instance. Wouldn't it make more sense to evaluate whether to split that $10,000 between the IRA and the Roth, rather than automatically withdrawing the full amount from a taxable brokerage account? 

 What are your thoughts on tapping your Roth and converting your 401(k) and IRA to a Roth? 

 Retiree 

 Related: After 46 years working, I'm not retiring - instead, I take a vacation every month. Is that a good life in your 70s? 

 You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually. 

 That "rule" is a guide and a reminder to keep an eye on those tax brackets and also fulfill your Required Minimum Distributions. 

 Dear Retiree, 

 It's not a golden rule. You're right about that. It's a guide and a reminder to keep an eye on those tax brackets, as you point out, and also fulfill your Required Minimum Distributions which, along with your Social Security benefits, are likely to be taxable. 

 Social Security benefits become taxable if your overall combined annual income exceeds $25,000 for individuals or $32,000 for married couples filing jointly. Up to 50% of benefits are taxed at these levels, increasing to 85% if income exceeds $34,000 (single) or $44,000 (married couples). 

 In your case, it makes sense to cover your RMDs, which you must start at 73, and, as you say, use nontaxable income from your Roth for those $10,000 emergency savings today, if, for example, your roof springs a leak, in order to keep a lid on your taxable income. 

 At 73, the factor is 26.5, so you must withdraw about 3.77% of the account balance, pretty close to the 4% withdrawal guideline. With, say, a $1 million in pretax retirement accounts (your post-tax accounts are not subject to RMDs), your first RMD would be about $37,736. 

 Falling over the IRMAA cliff could lead to a big jump in your Medicare Part B and D premiums. 

 For example, falling over the income-related monthly adjustment amount (IRMAA) cliff could lead to a big jump in your Medicare Part B and D premiums if you cross that threshold, the 3.8% net investment income tax, your state taxes and survivor tax rates (when one spouse dies). 

 Falcon Wealth Advisors also busts what it calls the "spend the Roth last myth." It also says that it's a common misconception that  Roth IRAs should be the last account tapped in retirement. It also plays into the general anxiety many retirees have about spending, period. 

 "Whether it's buying a first home, funding a dream vacation, or covering a large purchase, Roth IRAs can act as a 'slush fund' without triggering taxes or penalties - if used wisely," Falcon Wealth Advisors says. (It too acknowledges that it's either a mindset or a myth.) 

 So your decision to take that $10,000 for travel or some other expense (a new kitchen, perhaps, or better insulation for your house) is right on the money. Convert as much as you can to a Roth when you have a low tax bracket (usually between retirement and your RMDs). 

 Dip in the market 

 Another good time to convert shares to a Roth is when there's a big dip in the market, so you're selling those shares at a discount and, all going well, they'll see some upside when the correction/recession, socioeconomic crisis or pandemic is over. 

 Vanguard highlights the risks and rules for Roth conversions. "The conversion will be permanent - you can't revert the money back to a traditional IRA." The decision also hinges on issues like your tax rate now versus later, the final tax bill and your estate plans, it adds. 

 "There's a five-year holding period on withdrawals of money that were part of a Roth conversion," Vanguard says. "So if you think you'll need the money within that time, you should reconsider. You could end up owing the taxes you were hoping to minimize with a conversion." 

 Bottom line: "If you believe your tax rate is lower now than it will be when you start taking withdrawals, a conversion may look promising because you'll pay conversion taxes while you're in a lower tax bracket and enjoy tax-free Roth IRA withdrawals later." 

 Tapping your Roth last is not even a bronze rule. It's a decision that varies person to person. 

 There is no annual dollar limit on the amount you can convert from a traditional IRA or 401(k) to a Roth IRA. You can convert any amount you like, just keep in mind that the converted sum is generally treated as taxable income. Read more about Roth conversions here. 

 Passed in July 2025, the One Big Beautiful Bill Act altered the tax code by increasing the SALT deduction cap to $40,000 (for annual incomes under $500,000) through 2029. It extends the Tax Cuts and Jobs Act's individual tax rates and higher standard deductions. 

 It also introduced a $6,000 senior deduction (2025-2028) and 100% bonus depreciation for businesses. Taxpayers age 65 and older can also claim an additional $6,000 deduction per person, subject to income phase-outs. A married couple could convert up to $12,000 extra. 

 Tapping your Roth last is not even a bronze rule. It's a decision that varies from person to person, and whether it makes sense depends on all of the above factors, and what financial pressures are going on in your life at any given time. 

 Related: 'I didn't ask a man to rear-end my car': Social Security is replacing my disability benefits. Will the fund run out of money? 

 More columns from Quentin Fottrell: 

 'I don't own a home': I'm 62, unemployed and have $1.5 million for retirement. Can I afford to divorce my husband? 

 'My parents begged me never to put him in a home': I have taken care of my disabled brother my entire life. Am I doing enough? 

 Can I stop my kids from using their inheritance to support political causes I vehemently oppose? 

 Check out The Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns. 

 By emailing your questions to The Moneyist or posting your dilemmas on The Moneyist Facebook group, you agree to have them published anonymously on MarketWatch. 

 By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties. 

 -Quentin Fottrell 

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03-14-26 1157ET

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