Saving for retirement is only half the challenge. Once the paycheck stops, the way you turn your accumulated wealth into income can have a major impact on how long that money lasts—and how much of it ultimately goes to taxes. The familiar strategy of spending taxable investments first, tapping Traditional IRAs and 401(k)s later, and preserving Roth money for the end sounds logical, especially when the goal is to keep today's tax bill as low as possible.

But for retirees with substantial pre-tax savings, that approach can create a very different problem down the road. Traditional accounts can continue growing while required minimum distributions eventually force taxable income into the picture, potentially interacting with Social Security taxation, Medicare IRMAA, capital gains, and future tax brackets. Suddenly, the strategy that looked tax-efficient during the early years of retirement may create a much larger income spike later.

The alternative isn't to blindly withdraw from every account or convert everything to Roth. It is to think strategically about when income is recognized, which account supplies it, and how today's decision affects the years ahead. By coordinating taxable assets, Traditional accounts, Roth savings, Social Security, and available tax brackets, retirees may have more control over their lifetime tax burden than a simple withdrawal hierarchy suggests.

Ava is the first AI BDR to run outbound end to end, and you decide whether she runs autonomously or on copilot.

She finds leads or ingests accounts from your CRM, enriches them, sends personalized emails on behalf of your reps, follows up, handles replies and books meetings. Website visitor de-anonymization, intent signals, and a parallel dialer come built in.

A small team can manage her centrally for thousands of reps who never log in. Everything syncs two-way with Salesforce and HubSpot.

Ava runs outbound for companies like DoorDash and Grammarly, and one customer deploys her across 1,000+ reps. Ava is SOC 2 Type II audited, SSO and GDPR ready. Ava is how revenue teams grow pipeline without growing headcount.

Book a demo

What if the money you’re protecting from taxes today is quietly setting up a bigger tax bill tomorrow? Discover why the “taxable first, Roth last” rule may not work for everyone—and how a smarter withdrawal strategy could help keep more control in your hands.

Be sure to read through to the end to catch all the valuable insights this newsletter delivers to your inbox today.

AAOI $AAOI ( ▼ 4.3% ) did not look like a standout for most of the past five years. The real move came late, followed by a sharp pullback. Even after that drop, the share price still climbed from about $7.43 to $105.53 — a 1,320% total gain, or roughly 70% average growth each year.If that same average rate carried forward, the math would still look strong.

Over 60 months you would put in $30,000. At a similar growth pace, that could grow to somewhere between $138,000 and $155,000.The value of dollar-cost averaging shows up clearly on a chart like this.

You would have bought more shares during the long quiet stretch and fewer during the spike, which can improve your average cost and keep you from putting too much in at the peak. The stock has already fallen from its 52-week high of $233.67, which makes that point hard to miss.

Past results never guarantee the future, and this stretch looks well above what most companies deliver over time. For anyone who understands that risk and still wants a consistent long-term approach, the monthly habit remains useful — just with more grounded expectations than the last five years alone would suggest.

Retirement planning is often treated like a savings problem: build enough money, invest it wisely, and then start taking withdrawals when the paycheck stops.

But there is another problem hiding underneath all of that.

How you take the money out can matter almost as much as how much you saved.

You can spend decades doing everything right—maxing out a 401(k), building a taxable brokerage account, accumulating a Traditional IRA, and leaving a Roth IRA untouched. Then retirement arrives, and a strategy that looked perfectly responsible during your working years can create a surprisingly expensive tax bill later.

For the busy retiree who does not want to spend every weekend running tax simulations, this is the important shift in thinking: retirement income is not simply about finding money to spend. It is about controlling where that money comes from, when it comes out, and what other financial consequences it creates.

That is where the traditional withdrawal rule deserves a closer look.

The familiar retirement strategy sounds straightforward.

Spend from your taxable brokerage account first. Once that money is depleted, move to Traditional IRAs and 401(k)s. Keep the Roth IRA untouched for as long as possible because qualified Roth withdrawals can be tax-free.

There is logic behind this approach. Roth assets are exceptionally valuable, and allowing them to compound tax-free can be attractive.

The problem is that this strategy can unintentionally concentrate too much money inside tax-deferred accounts.

And tax-deferred does not mean tax-free.

Traditional IRA and 401(k) contributions may have received tax benefits when the money went in, but withdrawals generally become taxable income. Eventually, the tax code also stops allowing you to postpone withdrawals indefinitely.

For most retirees, required minimum distributions, or RMDs, generally begin at age 73. Under current law, the applicable starting age rises to 75 for certain younger cohorts. Roth IRAs generally do not require lifetime RMDs for the original owner.

That creates a potential problem.

Imagine spending several years drawing almost exclusively from taxable investments while leaving a large Traditional IRA untouched. The IRA continues compounding. That sounds great—until the balance becomes large enough that future RMDs produce substantial taxable income.

Suddenly, retirement income can become much less predictable.

And this is where the strategy becomes more complicated than simply asking, “Which account should be spent first?”

One of the most overlooked pieces of retirement income planning is the interaction between IRA withdrawals and Social Security.

Social Security benefits are not automatically taxable. But the amount that can become taxable depends on your income, including one-half of your Social Security benefits and other income.

Under the current federal rules, up to 85% of Social Security benefits can be included in taxable income once the applicable income thresholds are exceeded. For example, the thresholds for up to 85% taxation are more than $34,000 for single filers and more than $44,000 for married couples filing jointly.

This creates what is commonly called the Social Security tax torpedo.

The reason is simple: an additional dollar of taxable income can sometimes cause more of your Social Security benefit to become taxable at the same time.

That means the marginal tax cost of an additional Traditional IRA withdrawal can be substantially higher than the tax bracket printed on the tax table.

Consider a simplified example.

Suppose an additional $1,000 withdrawal from a Traditional IRA lands in a 22% marginal federal bracket. At first glance, the tax appears to be $220.

But if that withdrawal also causes an additional $850 of Social Security benefits to become taxable, the amount of income affected could be much larger than the original $1,000 withdrawal.

That is why looking only at your stated tax bracket can be misleading.

The real question is not simply, “What tax bracket am I in?”

It is:

“What other parts of my financial life does this additional dollar affect?”

That is the question a smarter retirement withdrawal strategy needs to answer.

Social Security taxation is only one piece of the puzzle.

Medicare can create another income-sensitive cost through IRMAA, the Income-Related Monthly Adjustment Amount.

This is where retirement planning gets particularly interesting because IRMAA is not simply another federal tax bracket.

For 2026, the standard Medicare Part B premium is $202.90 per month. For individuals with modified adjusted gross income above $109,000 and married couples filing jointly above $218,000, additional Part B premiums apply. At the highest income tier, the total Part B premium reaches $689.90 per month. Part D also has income-related adjustments.

That can make a seemingly harmless financial decision much more expensive.

A large IRA withdrawal.

A Roth conversion.

A major capital gain.

The sale of an appreciated asset.

These transactions may be reasonable individually. But when they push income across an IRMAA threshold, the consequences can extend beyond the income-tax return.

There is another detail busy retirees especially need to remember: IRMAA generally looks backward at tax-return information from two years earlier.

So the financial decision made today can influence Medicare premiums in a future year.

That is why retirement tax planning cannot stop at this year's tax bill.

This is where the strategy becomes much more interesting.

Instead of thinking about retirement withdrawals as a simple sequence—taxable account, then Traditional account, then Roth—it can make more sense to think about income smoothing.

The objective is to avoid creating extremely low-income years followed by extremely high-income years.

Consider the years immediately after retirement.

You may no longer have a salary.

You may not have started Social Security yet.

You may not have reached the age when RMDs begin.

That can create an unusually valuable period in which taxable income is lower than it may be later.

Call it the retirement income valley.

For some households, this period can provide an opportunity to deliberately recognize income while the marginal tax cost is relatively manageable.

That could mean taking measured withdrawals from a Traditional IRA or converting a portion of Traditional IRA assets to a Roth IRA.

The idea is not to manufacture a giant tax bill.

It is to avoid allowing a giant tax bill to build quietly in the future.

A Roth conversion moves money from a Traditional retirement account into a Roth account.

The converted amount is generally included in taxable income for the year of conversion, subject to the applicable rules.

That means a Roth conversion can create a tax bill today.

At first glance, that may seem like the opposite of what a good retirement strategy should do.

But sometimes paying a controlled tax bill today can be preferable to allowing a much larger taxable balance to accumulate for later years.

The opportunity becomes especially interesting during lower-income retirement years.

Instead of waiting until RMDs force taxable withdrawals, a retiree may gradually move portions of the pre-tax account into Roth territory while managing the tax brackets and other income thresholds along the way.

The Roth then provides another source of retirement income that can offer significant flexibility because qualified Roth withdrawals are generally tax-free and Roth IRAs are not subject to lifetime RMDs for the original owner.

But this is where caution matters.

A Roth conversion is not automatically a good move simply because Roth money is tax-free later.

A conversion can increase current taxable income, potentially affect Medicare premiums, and interact with Social Security taxation and other income-based provisions.

The goal is not to convert as much as possible.

The goal is to convert intelligently.

Give a Skydive agent an ongoing responsibility and they’ll handle it on schedule, every time.

Have them prep your morning report, research new leads, monitor customer feedback, or keep projects moving overnight. You wake up, the work is already done.

Make your first agent

For many retirees, the most useful mental model is to view retirement savings as three different tax buckets:

Taxable assets:
These may provide flexibility and can be useful for funding spending while managing realized capital gains.

Tax-deferred assets:
Traditional IRAs and 401(k)s can provide substantial retirement income, but withdrawals generally create taxable income and RMDs eventually become part of the picture.

Roth assets:
Qualified withdrawals can generally be tax-free, making Roth money particularly valuable as a flexible reserve later in retirement.

The mistake is assuming that one bucket must be completely emptied before touching another.

That approach is easy to understand, but retirement taxes are not designed around simplicity.

A more flexible strategy may use portions of multiple buckets each year.

Perhaps taxable assets cover part of the spending requirement. A measured Traditional IRA withdrawal supplies another portion. Roth assets fill a gap when additional taxable income would be particularly expensive.

The precise mix depends on the household.

But the underlying principle is powerful:

Do not let the tax code dictate your withdrawal schedule simply because one account appears cheaper to use today.

A practical framework can make this easier to think about.

Claiming Social Security is not purely a question of when the money is needed.

For people born in 1943 or later, delayed retirement credits can increase benefits by 8% for each full year of delay after full retirement age, up to age 70.

Delaying can therefore serve two purposes for some households: increasing the eventual monthly benefit while also creating additional years in which retirement assets can be managed before Social Security enters the income calculation.

That does not mean everyone should delay until 70.

Health, longevity expectations, household finances, survivor benefits, and spending needs all matter.

The important point is that Social Security timing should be considered alongside the tax strategy rather than treated as a completely separate decision.

The years between leaving work and the later stages of retirement can be extremely valuable.

Instead of automatically minimizing taxable income, examine how much room exists in the lower tax brackets.

That may create an opportunity for measured Roth conversions or Traditional IRA withdrawals.

The objective is to gradually reduce future tax exposure without unnecessarily jumping into higher brackets or triggering other costs.

Rather than following a rigid account-by-account sequence, consider whether a combination of taxable, Traditional, and Roth assets could produce a more stable income profile.

The right combination will vary from person to person.

For one retiree, taxable assets may make sense for part of the spending requirement.

For another, taking some Traditional IRA income earlier could reduce the size of future RMDs.

For another, preserving Roth assets as a later-life reserve may provide valuable flexibility.

The point is not that one formula works for everyone.

The point is that withdrawal order should be actively designed rather than automatically inherited from a generic retirement rule.

Qualified charitable distributions, or QCDs, can be particularly useful for eligible IRA owners who are charitably inclined.

A QCD allows an eligible IRA owner to make a qualifying charitable distribution directly from an IRA to an eligible charity. When the requirements are met, the distribution can receive favorable tax treatment and can count toward an RMD.

That can make charitable giving part of the withdrawal strategy rather than something completely separate from it.

And if Medicare premiums are being affected by unusually high income from an earlier year, Form SSA-44 may be relevant when a qualifying life-changing event—such as retirement—has reduced income. That is an important distinction: IRMAA does not simply disappear because someone retired, but certain life-changing events can allow Medicare to reconsider the income used to calculate the adjustment.

These tools are not loopholes.

They are part of understanding how the rules actually work.

This is the deeper lesson.

Retirement tax planning is not really about winning this year's tax return.

It is about managing the next 10, 20, or even 30 years.

A strategy that produces a $0 tax bill today might create enormous taxable income later.

Likewise, paying some tax today does not automatically mean the strategy is bad.

Sometimes the better outcome is to voluntarily recognize income during lower-income years rather than allowing RMDs, Social Security, and other income sources to collide later.

Think of it as tax smoothing rather than tax avoidance.

The goal is not necessarily to pay the least tax this year.

The goal is to reduce the total tax burden across your retirement while preserving enough flexibility to respond when circumstances change.

That distinction is easy to miss when retirement planning becomes a collection of isolated decisions.

For someone who has spent decades accumulating wealth, the instinct is understandable: protect the portfolio, avoid taxes, and let tax-advantaged accounts compound for as long as possible.

But once retirement begins, the job changes.

You are no longer simply accumulating assets.

You are converting those assets into a sustainable stream of spending.

And that means tax location, withdrawal timing, Social Security, Medicare, RMDs, and Roth conversions all become part of the portfolio strategy.

The smartest withdrawal strategy may not produce the lowest tax bill this year.

It may produce a more predictable tax bill over many years.

That is a much more useful objective when the goal is to make your savings last.

So if retirement is approaching—or already underway—do not settle for the simple question, “Which account should be spent first?”

Ask a better question:

“How should every retirement income source work together so that today's withdrawal does not create tomorrow's tax problem?”

That is where the real planning begins.

And for the overwhelmed, busy investor who does not have time to obsess over every tax rule, that is perhaps the most important takeaway of all: you do not need a complicated retirement strategy. You need a coordinated one.

Before making Roth conversions, changing Social Security timing, accelerating IRA withdrawals, or making other major retirement-income decisions, run the numbers with a qualified tax or financial professional. Tax rules, Medicare thresholds, and personal circumstances can change, and the best strategy depends on your specific income, account balances, filing status, spending needs, and future goals.

The objective is not to outsmart the tax code.

It is to stop letting the tax code make retirement decisions for you.

Ready to Revolutionize Your Wealth?

Here's what's waiting for you:

As the world becomes increasingly digital, this question will be on the minds of millions seeking new income streams in 2026.

The answer is—Absolutely!

Thank you for taking the time to read today’s email! Your support is what allows me to send out this newsletter for free every day. 

 What do you think of the new format? Please provide your feedback in the poll below, and if you find the newsletter valuable, feel free to share it with other investors!

Disclaimer: This newsletter is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor before making any investment decisions.