Here's Where You Should Pull Money From First in Retirement

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When planning for retirement, most of us focus on making sure we're saving enough money. Personally, I've spent years learning about the different types of IRAs , how to access a 401(k) since I'm self-employed, and figuring out how much I need to retire.

But there's also a strategy to how you pull out money in retirement, especially if you have multiple types of investment accounts. Here's what to keep in mind when you're ready to start pulling money from your retirement accounts.

Start with your taxable accounts

Typically, you want to pull from your taxable investment accounts first. There are several reasons for this -- first, it lets those sweet tax-deferred accounts to keep growing tax free. Pulling from your taxable accounts can also lower your current taxes, since withdrawals usually result in capital gains taxes that tend to be less than income tax.

Taxable accounts also give you more control over what you sell, allowing you to balance your tax liability more and avoid triggering higher Medicare premiums.

Tap traditional IRA or 401(k)s next

After depleting your taxable accounts, you'll move onto your traditional tax-deferred accounts, such as your employer-sponsored 401(k), Solo 401(k) or traditional IRA. Withdrawals from these accounts are taxed as regular income, so you might want to balance withdrawals with your taxable accounts. Also, pay attention to how much you pull out and avoid bumping yourself up into the next tax bracket unnecessarily.

If you do need to pull out enough to get to the next tax bracket, keep in mind the new bracket only applies to income over the limit. Let's say the tax bracket is 15% for up to $50,000 and 25% for $50,000 to $75,000. If you pull out $60,000, you'll pay 15% for the first $50,000 and 25% only the $10,000 over $50,000.

Pull from Roth accounts last

If you have access to a Roth 401(k) or IRA, taking money from these accounts should be your last step. Withdrawals are tax free, so the longer they grow, the better. Additionally, you can tap Roth accounts in years you need a little more to cover costs but don't want to bump yourself up a tax bracket. Just aim to manage this process carefully.

Don't forget your required minimum distributions (RMDs)

There's one caveat to keep in mind when considering which accounts you need to pull from. If you're over the age of 72, you're subjected to required minimum distributions, also known as RMDs. This is the minimum amount you must withdraw from your retirement accounts each year. The amount varies based on your age and the total balance of your accounts.

By being strategic in where you pull income from in retirement, you can both limit your tax liability and give your money more time to grow.

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