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When you shift from saving for retirement to living in retirement, one of the most important questions becomes: How do I pay myself — and how can I make it last?
Many retirees think the hard part is over once they’ve built their nest egg. But the truth is, how you withdraw your money matters just as much as how you saved it.
Without a plan, you risk paying more in taxes than necessary, running out of money too soon, or missing opportunities for greater financial flexibility.
A tax-efficient withdrawal strategy is key to creating a sustainable retirement paycheck — especially for women, who often live longer and may manage finances independently later in life.
Understand the Three Types of Accounts
Most retirement savers hold assets in three types of accounts, each with different tax treatments. Your withdrawal plan should coordinate across all three.
1. Tax-Deferred Accounts
These include traditional IRAs, 401(k)s, and 403(b)s. Contributions were pre-tax, and withdrawals are taxed as ordinary income.
2. Tax-Free Accounts
These are Roth IRAs and Roth 401(k)s. Contributions were made with after-tax dollars, and qualified withdrawals are tax-free.
3. Taxable Accounts
Brokerage accounts and individual investment accounts. You pay taxes only on dividends, interest, and capital gains.
Each account type plays a different role in your retirement income plan — and the order in which you draw from them affects your overall tax liability.
Sequence Your Withdrawals Intentionally
There’s no one-size-fits-all withdrawal order, but many strategies begin with drawing from taxable accounts first, then tax-deferred, and finally tax-free.
This sequence can:
Allow Roth accounts to grow longer tax-free
Keep you in a lower tax bracket early in retirement
Minimize future required minimum distributions (RMDs)
However, the optimal order may vary based on your income needs, tax bracket, and timing of Social Security.
Delay Social Security Strategically
For many women, delaying Social Security benefits can be a powerful way to boost lifetime income — especially if you expect to live into your 80s or 90s.
By waiting past full retirement age (up to age 70), your benefit increases by about 8% per year. In the meantime, drawing from savings or taxable accounts can help bridge the gap.
Delaying also gives you more flexibility in your tax picture before Social Security becomes part of your income mix.
Consider Roth Conversions in Early Retirement
The years between when you stop working and when RMDs begin (currently age 73 or 75 depending on your birth year) offer a valuable window to convert money from tax-deferred accounts to Roth IRAs.
These conversions create taxable income now but reduce future RMDs and allow for tax-free withdrawals later.
Roth conversions work best when:
Your income is temporarily lower
You have room in a lower tax bracket
You have savings to pay the conversion tax outside of retirement accounts
Working with a financial advisor can help determine if partial conversions over several years would benefit your long-term plan.
Minimize Medicare Premium Surcharges
Higher income in retirement can increase your Medicare Part B and D premiums through IRMAA (Income-Related Monthly Adjustment Amounts).
By carefully managing withdrawals — and using strategies like Roth conversions and capital gain harvesting before Medicare starts — you can help avoid unexpected increases in healthcare costs.
Coordinate with Required Minimum Distributions (RMDs)
Once RMDs begin, you’re required to take a certain percentage from your tax-deferred accounts each year, and it’s fully taxable.
To prepare:
Start projecting future RMDs now to understand the potential tax impact
Consider "filling up" lower tax brackets with smaller withdrawals in earlier years
If you don’t need the income, consider making Qualified Charitable Distributions (QCDs) after age 70½, which can count toward your RMD and reduce your taxable income
Create Flexibility in Income
A tax-efficient withdrawal plan gives you control — the ability to shift between income sources depending on your needs, tax bracket, or changes in legislation.
This is especially helpful for women, who may face retirement alone or be more conservative with spending in early retirement years.
A flexible plan might include:
Taking dividends and interest from taxable accounts
Managing capital gains through timing and offsetting losses
Using Roth funds for larger expenses in high-tax years
Drawing minimally from IRAs until RMDs require it
The goal is to preserve optionality while meeting income needs and minimizing taxes over time — not just in one year.
Final Thoughts
Creating your own retirement paycheck doesn’t end when you stop working — it begins with a deliberate, tax-aware strategy.
And while taxes are just one piece of the puzzle, they can have an outsized effect on how long your money lasts and how much freedom you have in retirement.
As a woman nearing or in retirement, having a coordinated withdrawal plan is one of the most powerful tools you can use to secure your financial future.
Let’s Design Your Tax-Smart Retirement Paycheck
At Life Story Financial, we help women build retirement income strategies that are sustainable, tax-aware, and aligned with what matters most.
For more tips like these, download my free ebook series that covers debt management, growing your income to save more, investing wisely and retirement planning. To learn what it's like to work with a financial advisor, you can book a free call with Life Story Financial.