When it comes time to begin taking disbursements from your retirement accounts, try to take them from your tax deferred or tax free accounts last (401k’s, Roth and Traditional IRAs) because you want them to grow tax-free as long as possible. If you opt to retire before 70.5, the age at which mandatory disbursements begin, try to use the funds you have saved up or invested outside of those retirement accounts first. Taxed funds always grow slower because there simply is less of it around to grow with.
For example, if you have a brokerage account that you use to invest in the stock market and you retire in your sixties, you’ll want to tap that account before your 401k, Roth, or Traditional IRAs. With each disbursement from the 401k and Traditional IRAs, you will have them be taxed as ordinary income and you’ll also be reducing their balances so they won’t grow as quickly. With the Roth, you won’t pay any income taxes on your disbursements but you also won’t get tax free earnings either. So, in both cases, you’ll want to spend what you have outside of tax protected accounts first.