There is no universal taxable-first withdrawal order. Build the sequence one tax year at a time from spending, taxable income, account basis, conversion room, and the assets left for later years. The right answer is usually a mix, not one account emptied before the next begins.
This is a decision framework, not tax advice. Federal and state rules, filing status, investment basis, health-coverage assistance, and account history can change the result. Use current IRS instructions and a qualified tax professional before executing a distribution or conversion.
Start with the cash need, not the account label
Write down the household's gross cash need for the year, income that will arrive without a portfolio withdrawal, and cash already outside investment accounts. Then separate the remaining need from transactions that are optional. A Roth conversion, for example, can create taxable income without supplying spendable cash if the converted amount stays invested.
The FIRE Number and Timeline Planner can test two spending phases, working and coast contributions, two durable-income streams, and three account buckets with entered access ages. The planner identifies taxable, tax-deferred, and tax-free buckets, applies a user-chosen effective withdrawal rate to each, and enforces each entered access age. Those assumptions are sensitivity inputs, not tax-law calculations. The chosen effective rate is a user-defined sensitivity haircut, not a tax estimate or separate tax input. The planner does not calculate a tax return, track basis, apply tax brackets, optimize withdrawal order, or model conversion ladders. Use the result as a planning case, not as a tax-efficient withdrawal instruction.
Know what each transaction puts on the return
A withdrawal from a taxable brokerage account is not one uniform tax event. The IRS defines gain or loss from a sale using the amount realized and adjusted basis, and the holding period determines whether the gain or loss is short-term or long-term. Cash withdrawn can therefore be larger than the gain recognized.
The IRS says distributions from a traditional individual retirement arrangement are generally included in income, except for any return of basis from nondeductible contributions. Form 8606 is used to figure the nontaxable portion when basis exists. A pretax balance and an after-tax basis are not the same tax bucket merely because they sit under one account name.
The IRS says a qualified Roth distribution is not included in income. A nonqualified Roth distribution follows statutory ordering rules and may include contribution basis, conversion amounts, and earnings with different consequences. “Roth” is therefore not enough information for a withdrawal decision; the account history matters.
Build a provisional annual sequence
First cover near-term spending from cash and the transactions already required by the plan. Next compare taxable sales by basis and holding period, pretax distributions, and available Roth basis. Then decide whether an optional conversion belongs in the same year. This is a worksheet order, not a claim that the first category should always be exhausted.
The IRS says the taxable portion of an amount converted from a traditional arrangement to a Roth arrangement is included in gross income for the conversion year. That makes a conversion a current tax decision even when the money is intended for much later spending.
Compare the partial mix against at least three things the simple account order misses: the marginal cost of more taxable income now, the value of preserving flexible assets for later, and the tax exposure being left in pretax accounts. The calculation belongs on the actual return assumptions for that year, not on a lifetime promise that one account type always goes first.
Keep healthcare in the same worksheet
For a household buying coverage before Medicare, a distribution, conversion, or realized gain can affect the income reported to the Marketplace. The coverage rules and enrollment sources are mapped in the healthcare bridge guide. Do not optimize an income-tax line while ignoring a coverage consequence that depends on the same income estimate.
State income tax, capital-loss carryovers, charitable giving, pensions, Social Security, and required distributions can also change the sequence. This page does not model those facts. The point of the annual worksheet is to surface them before the account transfer is made.
Look beyond the current year
The IRS requires minimum distributions from many retirement accounts once the applicable starting rules are met. Roth individual retirement arrangements do not require distributions while the owner is alive. Leaving every pretax dollar untouched can therefore move taxable income into later years rather than eliminate it.
Now run the provisional sequence forward. What flexible assets remain for a market decline? What account will cover a large irregular expense? Does a conversion today support an access plan later? Would a surviving spouse or a move to another state change the comparison? These are reasons to revisit the order each year, not reasons to pretend a multidecade tax forecast is precise.
The decision test
A withdrawal order is ready for the year when it identifies the cash need, the taxable character of each proposed transaction, the account basis records behind it, the healthcare and state-tax interactions, and the assets deliberately preserved for later. “Taxable, then pretax, then Roth” is a mnemonic. It is not the analysis.
Return to the FIRE decisions index, or continue to the account-access guide for SEPP, Roth conversion ladders, and the separation-from-service exception.