"The brokerage sits untouched. By 73, the 401(k) balance is materially smaller, so her RMD plus Social Security mostly stays in the 12% bracket for the rest of her life. Lifetime federal tax: approximately $112,000. Why the brokerage stays parked The $200,000 taxable account is the most valuable inheritance vehicle she owns because of step-up in basis at"
A 66-year-old retiree with a taxable brokerage, a traditional 401(k), and a Roth IRA must choose which account to withdraw from first. A conventional approach withdraws from the taxable brokerage early, then from the 401(k), which causes the 401(k) to remain large when required minimum distributions begin. Those distributions stack on top of Social Security, keeping taxable income in the 22% bracket through later years and increasing the chance of higher Medicare-related costs. A bracket-smoothing approach withdraws from the 401(k) and Roth first, keeping taxable income in the 12% bracket before RMDs start. This reduces later RMD amounts and lowers lifetime federal income tax substantially.
Read at 24/7 Wall St.
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