How to Coordinate Your Retirement Paycheck Before Year-End

If you're retired, your financial plan isn't really a pile of accounts. It's a system — one that turns years of saving into income, on a schedule and structure that either works with the tax code or quietly works against you.

Why the source of the dollar matters as much as the amount

Say a retired couple needs an extra $30,000 this year for a roof replacement. They pull it from their traditional IRA because it's the account they think of as "extra." That withdrawal is fully taxable as ordinary income — and if it pushes their taxable income past $403,550 (the 2026 threshold for married filing jointly), every dollar above that line is taxed at 32% instead of 24%. It can also increase how much of their Social Security becomes taxable, and — because Medicare looks at income from two years earlier — it can trigger an IRMAA surcharge on their Part B and D premiums two years from now, for a home repair they've already paid for and mostly forgotten about.

Had they instead pulled the same $30,000 from a Roth IRA or a taxable brokerage account (using long-term capital gains, taxed at a lower rate), none of that would have happened. Same expense, same dollar amount, meaningfully different consequences — because the source of the withdrawal, not just the size of it, determines what it costs.

RMDs: the aggregation rules that trip people up

If you have RMDs from multiple traditional IRAs, you're generally allowed to calculate each one separately and then withdraw the total from whichever IRA (or combination) you choose — the accounts can be aggregated. But an inherited IRA can't be combined with your own IRAs for this purpose, and RMDs from employer plans like 401(k)s generally have to be calculated and withdrawn separately from each plan, with no aggregation allowed at all. The one common exception: multiple 403(b) accounts can be aggregated with each other. Get this wrong — take a required amount from the wrong bucket, or short one account while over-withdrawing from another — and you can end up facing a penalty on the shortfall even though you took the correct total amount overall.

Now Money and Later Money

This is where it helps to think in two buckets rather than one pile. Now Money is what covers this year and next — spending, the emergency fund, a planned purchase you already know is coming. Later Money is what's still invested for the years ahead. Every fall is a good moment to ask whether those two are still sized appropriately, or whether a year of heavier travel, a large gift to a grandchild, or an unplanned expense quietly pulled more from Later Money than the plan intended.

The takeaway

The trap is defaulting to "pull from whatever did best this year" or "pull from whichever account is easiest to reach." Neither is a strategy — it's a coin flip that happens to have tax consequences. The better question is always which account is supposed to be playing which role in the plan, and whether pulling from it now still serves that role. That's a conversation worth having in October, while there's still time to choose the better-taxed dollar — not in the last week of December, when the only accounts left to pull from are whichever ones haven't been drained yet.

This article is for informational purposes only and not tax advice. Always consult your tax preparer for guidance specific to your situation.

LynnLeigh & Company - A Registered Investment Advisor This information is provided by LynnLeigh & Co. for general information and educational purposes based upon publicly available information from sources believed to be reliable – LynnLeigh & Co. advisors cannot assure the accuracy or completeness of these materials. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.   Past performance is not a guarantee of future returns.

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