STOP! Don't Make This IRA Withdrawal Mistake

Most people believe that once you retire, you just start pulling money from your IRA and everything works itself out. But what if I told you that one wrong withdrawal decision could quietly push you into higher tax brackets, increase your Medicare premiums, and cost you hundreds of thousands of dollars over time.

After more than 30 years of helping real families through retirement, I've seen people do everything right and still lose money simply because they pulled from the wrong accounts at the wrong time. In the next few minutes, you're going to learn why this mistake is so common, why it's so dangerous, and how understanding it could save your retirement plan before it's too late.

Having the wrong withdrawal strategy. What have you seen in your three decades? Why is this such a big mistake?

When you're pulling from the wrong place to start, you could be creating tax on Social Security.

Yep.

Unnecessarily.

That's a good point.

And when you create that tax, we now have IRMAA. So that causes your Medicare costs to go up. And each one of these moves has an effect. There's a cause and effect here. You make one mistake, it creates another. And sometimes you don't see it.

Mhm.

Until it's too late. I've seen people make this mistake countless times. And fortunately, the clients that I've worked with through the years, Spell, they will listen when I tell them to stop.

Mhm.

The problem is there's a lot of people out there that don't have an advisor telling them to stop. They just think they're doing the right thing.

Yeah.

And so they start pulling money. For example, they might be pulling everything from an IRA.

Mhm.

When they're 60 years old.

Yeah.

And some folks would say, "Well, yeah, do that. Go and get rid of that IRA." But not if you have other income.

Good point.

That could be causing additional tax.

Yep.

So, it might make more sense to let that IRA grow and wait until you're forced to take the money out potentially. But there's situations where it does make sense to pull from a taxable account or a pre-tax account first.

Yep.

There are those situations. But knowing when and where to pull first, so important, and it is so overlooked, and it is partly why a lot of people run out of money before they run out of time.

Yeah. And maybe what some people are thinking about, if you're listening to this and you're thinking, what are you talking about, pulling from different places? You gave a stat earlier. I don't remember if it was this week or last week, and you said that a huge portion of our population only has money in a 401k. A massive percentage of the population, and it's their largest asset.

And it's the largest asset.

I think what we're talking about, and really it's a luxury. It starts from an early age. If you can put someone in your corner who can provide you with great advice and diversify you across the tax environments, then what we're talking about in terms of withdrawal strategy makes a lot of sense. Because as you age and you approach retirement and you start taking Social Security and you're talking about things like IRMAA that you mentioned, having the ability to pull money from different tax environments is so important. And people, I think, make a massive mistake if you have multiple tax environments to pull from. You need a plan to coordinate where the money needs to come from.

Because the average person doesn't know how to test what withdrawals from one account will do from a tax standpoint versus another.

It's true.

Or what it does to overall performance. They don't understand that.

Mhm.

And a lot of the planners out there who are suggesting that they know how to do these things, but they don't. So they will make decisions for the client or help the client decide where to pull money from and they don't know.

Yeah.

And so you have the blind leading the blind. And there are ways to do it, but you need the technology to do it. It's complicated, but you need tax software to be able to do these things, to run these possible outcomes.

Yep.

When you do that, you can pretty confidently decide where the money should be coming from, right? First or second or whatever the sequence happens to look like. You really need to do that. It takes time.

Mhm.

But we saw a client just a year ago, not even a year ago, and they were pulling money from the worst place they could pull it given their circumstances.

Yeah.

They had significant earned income because one spouse was still working, and they were pulling close to 200,000 a year from a qualified account.

I know who you're talking about.

Oh, so you take those two, put them together, and all of a sudden they were headlong into one of the top tax brackets. Made no sense. Accountant didn't tell them. Nobody warned them. And they were doing this for years. That to me is what pains me more than anything. They had paid professionals.

That's right.

Helping them with their situation, and no one ever said a word about it. To me, that's criminal.

Yeah. Unfortunately, a lot of these situations like that are buyer beware, and the client didn't know.

Yeah. Their accountant didn't say a word. Whoever's listening today, going through distribution phase now, maybe you're already into retirement, you're going through distribution, take the time to get a second opinion on how you're doing it. You might be doing it perfectly, sure, but if you're not, you want to know sooner rather than later, because those imperfect distributions can cost you a fortune.

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