Hi friends, this is Devin Choules, Founder and CEO of Choules Financial.
On this week’s episode of The Key to Yes, we’re talking about strategic income in retirement—specifically, which bucket to draw from when you need income, and how to do it in the most tax-efficient way.
You might be wondering:
Should I take from my brokerage account?
My pre-tax 401(k)?
My Roth IRA?
Which option gives me the most income for the least tax?
The answer: There is a strategy—and it matters.
The more you pay in taxes, the less income you keep. So our goal is to help you keep more and give less to Uncle Sam.
The Tax Triangle
We often use what we call the Tax Triangle to help people visualize how their retirement savings are taxed:
Always-Taxed Bucket
You pay taxes every year—no matter what.
Think:
CDs
Bank interest
Rental income
Brokerage account interest or dividends
Pensions and Social Security
You’ll receive a 1099 each year telling you how much is taxable.
Later-Taxed Bucket
These are your pre-tax retirement accounts. You haven’t paid any tax on this money—yet.
Think:
401(k), 403(b), 457, TSP, IRA, 401(a)
When you withdraw funds, you’ll owe ordinary income tax.
Once you turn 73, the IRS requires you to take Required Minimum Distributions (RMDs).
(If you’re not sure what those are, check out our prior video.)
Never-Taxed-Again Bucket
This includes:
Roth IRAs
Permanent life insurance (Section 7702 plans)
These are your tax-favored accounts, and if structured correctly, withdrawals can be tax-free for life.
Strategic Withdrawals: It’s Not One-Size-Fits-All
A common misconception is that you should always spend from one bucket first, then move on to the next. That’s not the case.
Instead, we often recommend a blended approach, taking some from each bucket based on your income needs and tax situation.
For example:
If you’re living on less than $100,000 per year, you may be able to withdraw from your brokerage account or Roth IRA completely tax-free.
But each withdrawal decision carries consequences. Your Social Security, for example, can go from 0% taxable to 85% taxable, depending on your other income sources.
That’s why we always say:
“A written plan is better than a hopeful guess.”
You need a Written Retirement Income Plan that clearly outlines:
How much income you need each year
Which account(s) to draw from
How to reduce taxes now and in the future
Roth Conversions: Move to the Top of the Triangle
If most of your savings are in pre-tax accounts like 401(k)s or IRAs, you’re likely to face higher taxes in retirement.
That’s where Roth conversions come in.
By moving money from your pre-tax accounts into a Roth, you pay tax now at known rates—and avoid paying tax later.
But Roth conversions require careful planning:
What tax bracket are you in?
Are you on Medicare?
How much Social Security are you receiving?
We usually recommend incremental conversions, not all at once, to minimize your tax burden.
At Choules Financial, tax strategy is a big part of what we do. I have a Master’s in Accounting with an emphasis in Taxation, and I’m passionate about helping clients build smarter plans—so they can keep more of what they’ve earned and give less away unnecessarily.
So, which bucket should you take from?
The truth is, there’s no universal answer. That’s why we emphasize having a proactive tax strategy and a written income plan tailored to your situation.
Because if you don’t spend it all, your loved ones will thank you later.
That’s all for this week on The Key to Yes.
If you haven’t already, make sure to hit subscribe, tap the notification bell, and we’ll see you next time.
And remember:
The name of the game in retirement is a Written Retirement Income Plan with a Proactive Tax Strategy.
