Here's Exactly How To Withdraw From A 401(k)/IRA To Live In Retirement

Feeling anxious about taking money from your retirement accounts? You’re not alone. That first withdrawal feels odd after decades of saving, but a clear process and tax plan turns uncertainty into confidence.

In this episode, Ari Taublieb, CFP®, breaks down how withdrawals actually move from investment accounts to your checking—and what the tax bite may look like.

Using a simple $100,000-per-year example for a married couple filing jointly, you’ll see illustrative ballpark math: in a no-income-tax state (e.g., Florida) the effective rate can land around ~8% (~$8,044), while a high-tax state (e.g., California) might be ~9.7% (~$9,683). That ~$2,000 gap often isn’t big enough to justify uprooting your life.

You’ll also learn a smarter way to “hold cash” for spending: keep withdrawal dollars intelligently invested while you spend. A $100,000 portfolio earning a modest 5% generates ~$5,000, which is roughly equivalent to one month of expenses at that rate, before fees, taxes, and market volatility. It’s not a guarantee, just math.

We’ll cover practical setups, like creating a dedicated travel fund while keeping core assets growing, and choosing a payout cadence (monthly, quarterly, or biweekly) that fits your comfort level. Whether you retire at 50, 60, or 70, the principles stay the same.

Ready to retire with more confidence? 

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Advisory services are offered through Root Financial Partners, LLC, an SEC-registered investment adviser. This content is intended for informational and educational purposes only and should not be considered personalized investment, tax, or legal advice. Viewing this content does not create an advisory relationship. We do not provide tax preparation or legal services. Always consult an investment, tax or legal professional regarding your specific situation.

The strategies, case studies, and examples discussed may not be suitable for everyone. They are hypothetical and for illustrative and educational purposes only. They do not reflect actual client results and are not guarantees of future performance. All investments involve risk, including the potential loss of principal.

Comments reflect the views of individual users and do not necessarily represent the views of Root Financial. They are not verified, may not be accurate, and should not be considered testimonials or endorsements

Participation in the Retirement Planning Academy or Early Retirement Academy does not create an advisory relationship with Root Financial. These programs are educational in nature and are not a substitute for personalized financial advice. Advisory services are offered only under a written agreement with Root Financial.

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Ari Taublieb, CFP ®, MBA is the Chief Growth Officer of Root Financial Partners and a Fiduciary Financial Planner specializing in helping clients retire early with confidence.

Episode Transcript

Speaker 1 (00:26):
Thank you, milan, as always, as well as Michaela
slash, Hannah, who will betaking this audio file.
To upload this, milan, I willnot be sharing my screen in this
episode, so this is just forthe audio file, so no need to
share anything going on myscreen.
Most people have unnecessaryworry when it comes to

(00:58):
withdrawing money in retirement.
Now, what I mean by that is Iknow why you're worried, because
it's been the first time You'venever actually taken money from
your 401k or IRA to live inretirement.
So right now, if you're in your40s or 50s or 60s or even 30s,
going, look, I'm going to retireearly one day, I just don't
know when.
Well, the truth is, it's goingto feel weird the first time and

(01:21):
then it's going to be one ofthose things you're used to.
You just want to make sureyou're withdrawing from the
right account and not payingmore in taxes than you need to.
I always like to say I'm allabout being patriotic, just not
to the point that you pay morein taxes than necessary.
So, with that being said, let'slook at an example and
understand how you can withdrawincome to minimize your tax bill
in retirement in light of beingrecently married, as of August

(02:09):
15th.
So, depending on when thisepisode is officially released,
might be a few months, but I amofficially married as of the
recording and I'm going to goahead and use a married filing
jointly example, since that'swhat I'm going to get to do Very
exciting stuff.
That's what keeps me excitednowadays, guys.
Now some of you are going tojoke with me.
Is that the only reason you gotmarried?

(02:30):
No, of course not, obviously,but it is a perk.
So Now my wife Alice did say isthis why we're doing it before
the end of the year?
I said no, no, no, nothing todo with that.
And it's true, it did havenothing to do with that.

(02:51):
But we're going to go throughan example now so you can get
some clarity.
So I'm going to go ahead andread through an example.
So, whether you're watching onYouTube or listening on the
podcast, you'll have the sameexact experience.
Now my name is Ari, I'm acertified financial planner,
host of this podcast, the EarlyRetirement Podcast, and Chief
Growth Officer here at Root, andI want to help you retire early

(03:13):
with confidence.
So there's not that littlething in the back of your head
wondering oh, I should havethought about this or why did I
miss that?
This is all I do and I love it.
So let's assume you're 60 yearsold in this example, and if

(03:39):
you're not 60 right now, itdoesn't matter.
You can use the same logic ifyou retire at 50 or 70, but
we're going to assume you're 60and you want to withdraw
$100,000 in retirement.
Now, that's $100,000.
I'm calling that after tax,adjusted for inflation.
So if you actually want$100,000 to spend, you might
need $120,000 or $135,000 or$140,000 if you actually want to

(04:02):
net $100,000.
In this example, we're justgoing to keep it simple and say
you're withdrawing 100,000 inretirement, and I'm going to
tell you what that actuallymeans after taxes in this
example.
Okay, so the way I want you tothink about it is you're going
to be pulling from a 401k or IRA, because that's most of you Now
some of you.
Because that's most of you, nowsome of you Sorry, milan slash,

(04:31):
hannah and Michaela, I am sick,so it's taken me a few attempts
to get through this episode.
Now some of you do have abrokerage account, which is what
I call a superhero account,which allows you to be more
flexible with how you createincome, which means you can play
capital gains taxes, not play,but pay capital gains taxes
instead of ordinary income,which is more tax efficient.

(04:53):
So if we're looking in justfrom the perspective of someone
who's 60, they've saved,invested, well, maybe they've
got 1 million, one and a halfmillion dollars and that's all
in their 401k, all pre-tax.
They want to start withdrawing$100k in retirement and they
want to know their tax bill andthey also want to know how do I
do it?
Do I do it monthly or quarterlyor annually, and is there a

(05:14):
difference?
So that's what we're going togo through today.
Okay, now a big variable iswhere you live.

(05:43):
If you live in California, likeme, specifically Los Angeles I
am in a high tax state.
If you live in Florida, you'rein a low or what some call no
tax state.
So what you want to make sureyou're understanding and I see
this too often is people will gooh yeah, I'm going to
absolutely retire in Floridabecause I'm going to save so
much in taxes when sometimesthey find it's not as big of a

(06:04):
saving as they thought andthey'd rather stay with their
friends and family and if theyreally knew the numbers, they
might not move to Florida.
So I'm not saying don't, I'mnot saying do it.
I'm saying understand the mathand let that guide your decision
.
So if we're just looking at themath here, if you're taking
$100,000, meaning that's whatyou're withdrawing from your
401k what you have to do first,quite simply, is you have to

(06:27):
sell something.
If your money's invested, youcannot go ahead and withdraw it.
It will not allow you to do so.
So if you have a Vanguard orFidelity or Schwab account, you
need to make sure that that'smoney freed up.
So now money is sold.
Now, when you do that, there'sno tax implications.
That's what's nice about havingyour money in a 401k.
You pay taxes when you take themoney out.

(06:48):
When you put the money in, youget a deduction.
No-transcript.

(07:21):
You're not having to pay taxeson those gains.
You're just paying taxes onwhatever you withdraw out,
because, as the IRS sees it,there's all money you got a
deduction for.
So if you put $1 and it grew to$2 million, and if you had $1
and it grew to $10, you'repaying taxes on whatever you
withdraw out, based off thatyear.
So let's look at an example.

(07:42):
If you're taking $100,000 outand you decide to take the
standard deduction, which is$29,200, that means $70,800 is
what's called your taxableincome.
That's what you're taxed on.
So the way it works here in theUS is we have a marginal system
.
So the first 10% excuse me, thefirst $23,200 is taxed at 10%,

(08:06):
which is $2,320.
And then the additional amountsfrom $23,200 to $94,300, that
is taxed at 12%, so that's atotal of $47,600 that's being
taxed and that's at 12%, sothat's $5,724, which means if

(08:27):
you live in Florida wherethere's no state tax, you're
looking at $8,044 as your totalfederal tax bill on your
$100,000.
Because once again, you get thestandard deduction.
Then you're taxed a portion at10% and a portion at 12%, which
means in the marginal bracket,meaning how much your highest

(08:48):
dollars are being taxed at.
That's 12%.
But your blended rate isactually 8%, because 8,044 is
your total tax bill.
So if we were to take that8,044 and divide that by 100,000
, you're right about 8%.
Which means if you live inFlorida and you're withdrawing
$100,000, 8% that's your taxbill.

(09:09):
That's what you can expect inretirement.
Now, everything I just saidthere it's the exact same for
California, except we have toadd state taxes.
For California, the first$20,824 is taxed at 1%, so

(09:34):
that's $208.
The next $20,824 to $49,368,that's taxed at 2%, so that's
$571.
And then additional amountsfrom $49,368 to $70,800 is taxed
at 4%, or $86060, for a totalof $1,639.

(09:55):
So your marginal bracket, ifyou live in California, would be
16%, meaning any additionaldollars you take out will be
federally taxed at 12% andfederal and state taxes would be
4%.
Same thing for Florida.

(10:16):
Your marginal bracket is 12%.
That does not change.
The difference is what's yourblended, what's your actual tax
that you're paying.
That's what you want to know.
So in Florida, if you're goingto live there, you're going to
have to pay tax of $8,044.
So you need to make sure thatyou understand.
Okay, if I'm taking $100,000, Idon't really have $100,000 to

(10:37):
spend.
I have $92,000 to spend.
In California, if you're taking$100,000 from your 401k, you're
going to pay a blended rate of9.7%, about $9,683.
So, right there, you're rightclose to paying about $10,000.
We're just going to keep itsimple and say you have $90,000
to spend.

(10:57):
So there are certain people thatwould say, wow, $90,000 versus
$92,000, that's enough of adifference that every single
year, yeah, I'm absolutely goingto move Other people go.
Well, that's not enough.
It's good for me to know.
Now the reality is I kept todayvery simple, because you need
to add in Social Security, youneed to add in part time work Is

(11:23):
someone going to have aninheritance rental income?
So I've kept it very simple.
But so often people get theselittle things confused.
So this is more of an episode,so that it just alleviates some
anxiety.
What I hope you also know isthere's not a perfect way to do
it.
I have certain clients thatthey want to have a year's worth
of income set aside fortraveling.
So pretend they go all right,yep, I'm gonna withdraw 100,000
so that in California I end upwith 90,000 after taxes.

(11:45):
They might say I wanna put 30away and that's just gonna be my
travel fund.
So if I wanna travel this year,I can go do it and then the
additional amounts.
So once again, we start with 90after taxes.
Now we have decided to put 30into a travel account.

(12:06):
That means 60 is available tous, but pretend they still need
more so that they can live forthis year.
Well, 60, they can decide tohave that in their account and
just have it paid to them everymonth.
But if they just keep that intheir checking account and spend
whatever they want every month,that's not growing for them.
So what most of my clientsprefer is they want to certainly
take money out so that if theywant to travel they can, meaning

(12:27):
they don't have to worry aboutif markets are doing well or not
, that that's dictating theirtrip.
But they do want to make surethat their money is growing for
them efficiently.
So most of the time what we'lldo is we'll have a certain
portion of their portfolio inwhat we call war chest
investments.
These are more conservative,less likely to grow, but they're
still growing.
So if they're getting 3%, 4%,5%, 6% growth every single month

(12:48):
, that is making a bigdifference.
Because if you were to keep$100,000, let's just say in your
account and just withdraw everymonth from it but not have the
money grow, at the end of theyear you would have taken about
$8,000 a month and you wouldhaven't made any money but you
would have lived.
Versus if you keep $100,000 inyour investment account at

(13:12):
Schwab or Vanguard or Fidelityand you decide to invest it and
get, let's say, 5% growth,that's $5,000.
That is maybe getting close toone month worth of retirement
living.
So all you have to do isunderstand how to invest well in
your account and you'reessentially getting close to
maybe one month's worth ofliving expenses.

(13:32):
So it's one of those thingsthat it is based on comfort.
But most clients who want tooptimize are electing to leave
the majority in their account,and we have clients that go.
I'd rather have it be paidquarterly.
We have other clients that go.
I'd rather have it be paidevery two weeks, because that's
how I'm used to living and Ijust want to maintain that.
So, for those that are clientsof root, they just inform us

(13:54):
what is their preference andthen we make sure their
investments are set up to createthat.
So that's it for this episode.
Just want to go over how youactually withdraw income in
retirement.
As you can see, it is notrocket science, but you want to
make sure you're not missing afew easy things that otherwise
could yield big value over time.
So, keeping it simple for today, hopefully you enjoyed this
episode.
If you are enjoying the content, please do like and subscribe

(14:17):
on YouTube and then, of course,please rate and review.
If you're listening on thepodcast app helps more people
find the show.
If you want to work with Root,this is what we do All the tax,
all the estate, all thehealthcare, all the withdrawal
strategies.
This is what we specialize in.
If you cannot tell, I'm alittle bit sick today, but I
never want to miss a week, so Iam always trying to record as
most efficiently as I can.

(14:38):
So I've not missed a week inyears, literally.
So I'm going to keep going andthat is it for this episode.
See you next time.