Let’s break down what that really looks like.

Understanding the 4% Rule and Monthly Withdrawals
The 4% rule is a classic strategy where you withdraw 4% of your portfolio in the first year of retirement and adjust that number each year for inflation. If you’ve saved $1 million, that gives you $40,000 a year. I prefer monthly withdrawals, which help keep the rest of your money invested and growing. Monthly payouts mean more time in the market—more potential for growth.

Three Key Retirement Withdrawal Considerations
There are three major levers you need to pull: Required Minimum Distributions (RMDs), the bucket strategy, and tax efficiency. Starting at age 73, RMDs kick in from traditional 401(k)s and IRAs. These withdrawals are mandatory and taxable, so they should be part of your overall strategy. The bucket strategy breaks your assets into short-term (cash), mid-term (bonds), and long-term (stocks), helping you weather market dips without panicking. And tax efficiency? That’s where you can really save. Using a mix of account types—traditional, Roth, and brokerage—lets you control your taxable income.

A Real-World Example: Tax-Free Withdrawals from a $1 Million Portfolio
Let’s say you’re a couple, both 67 years old, with a $1 million portfolio split like this: $400,000 in a traditional 401(k), $400,000 in a Roth IRA, and $200,000 in a brokerage account. You want to withdraw $40,000 per year. By taking $32,300 from your 401(k)—just enough to use your standard deduction and senior deduction—you pay zero federal taxes. Then you pull $7,700 from your brokerage account to hit your $40,000 target. That’s $3,333 a month of tax-free income, while your Roth IRA stays untouched and growing.

Adding Social Security to the Mix
Social Security benefits change the math. Suppose you and your spouse receive $36,000 annually from Social Security and need another $40,000 from investments. Withdraw $24,000 from your 401(k) and $16,000 from your brokerage account. Thanks to how provisional income is calculated, only $5,000 of your Social Security becomes taxable, and after deductions, you still owe no federal tax. That’s $76,000 in income—tax-free.

Managing RMDs and Long-Term Tax Implications
Don’t forget: your traditional 401(k) or IRA grows until those RMDs hit—and the bigger it gets, the more the IRS will want. That’s why drawing from your traditional accounts early can reduce your future tax burden. Keep Roth accounts growing for emergencies, future tax-free withdrawals, or legacy planning.

Adapting to Market Conditions with the Bucket Strategy
If the market dips, don’t sell your long-term investments. That’s where your short-term cash bucket comes in. Live off that while the market recovers, and refill the cash bucket once things rebound. Flexibility is key to any withdrawal strategy.

Start Planning Early—Adjust as You Go
Retirement planning isn’t a “set it and forget it” deal. It’s a process. Start early, use the right accounts, and stay adaptable. Whether you’re 35 or 65, there’s always room to optimize.

Join the Conversation
Drop your own strategy or questions in the comments. I’d love to hear what’s working for you or where you’re stuck. And if this helped, don’t forget to like, subscribe, and share—I post new videos weekly to guide you through every step of retirement planning.

All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.

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