Friends of ours are starting to think about retirement, they've been saving, the context is the mechanics for which order of types of accounts to take from. My approach may differ from other people in the industry but there is I believe a very basic or standard process for the decumulation phase. Once you understand the basics, you can then tweak to your circumstance when the time comes.
This list will start with the basic order and then a tweak that might serve as an example of how nuanced this can be. One thing that doesn't get talked about much on this front is that it is very plausible that the best strategy is to deplete one type of account entirely before moving on to the next one.
Go learn more and it can be complicated are really the only two takeaways from this list.
1. Taxable accounts
Typically it makes the most sense to take from joint, individual or trust accounts first. These are all taxable accounts. The idea is to let whatever types of IRA accounts you might have continue to grow tax deferred or tax free. Depleting your taxable investment account assuming there are IRA accounts of some kind is not a bad thing. It maximizes the the advantages of your IRA accounts. Yes you probably would still have a checking account and hopefully some sort of account for emergencies but in terms of taxable, investment accounts I would say the willingness to deplete it makes sense more often than not.
If you have to sell something to take money out, there will be a capital gains tax if you sold at a profit. Usually, long term capital gains are lower than income tax rates. Short term gains are usually taxed at your income rate.
