RMDs, withdrawal order, sequence-of-returns risk, and Roths are the most consequential and most modelable part of retirement income planning.
Social Security and any pension you have are reliable – they arrive on schedule each month. Plus, the former will automatically adjust for inflation and the latter may also, so you don't manage them, per se; they're just deposited to your account every month. What you have to manage (or have someone manage on your behalf), year after year, are the withdrawals from your investment accounts: how much, in what order, and from which asset "bucket." Depending on your situation, your withdrawal decisions matter more than almost anything else when it comes to funding a possibly long retirement. A million-dollar portfolio can be fully depleted sooner than expected due to poor withdrawal choices, and a modest one can stretch further than you'd expect with wise, disciplined ones.
This article covers the mechanics of portfolio withdrawals, including RMDs, the order money comes out, sequence-of-returns risk, where Roth accounts fit, and how RetireFlow models it all. But it's not a survey of every school of thought on the subject; it deals with the most common withdrawal methods at a high level.
The order of your investment returns matters far more in retirement than during your working years. While you're still saving and contributing, a market drop can, in some ways, be a positive; you keep buying shares at lower prices and benefit when things recover, which they seem to inevitably do. In retirement, the math reverses. Sooner or later you'll probably have to sell shares to fund withdrawals, and if the market drops in your first years of selling, you're forced to sell more shares to raise the same dollar amount. Plus, those shares are gone; they never get to participate in the recovery, which permanently reduces what's left.
If you remember the 2020 COVID crash and the 2022 inflation stretch, you know this isn't just academic. Retirees who went in heavily in stocks with no cash buffer and panicked during the downturn suffered permanent damage. Those with cash reserves and the discipline to sit through the volatility came out the other side intact, though it took a few years.
This is exactly what RetireFlow's Market Shock feature models. You can enter up to three independent real or custom downturns — each at whatever age you choose — and see whether a bad stretch early in retirement does more damage than the same stretch later on, and whether your asset buckets can absorb it.
Every year, the amount that has to come out of your accounts is the larger of two numbers: your Required Minimum Distribution, or your total income need before taxes, after Social Security and any pension are subtracted. Whichever is larger sets that year's required withdrawal. Early in retirement, spending usually drives the number; later on, the RMD usually takes over, since its percentage climbs every year purely because the IRS RMD divisor shrinks, regardless of what markets are doing. That said, you may find your RMD is greater than your income need; in that case, you still have to take the RMD, but you don't have to spend it all, of course.
Where that withdrawal actually comes from depends on the Withdrawal Approach you select in Step 2 of RetireFlow. Four options are available.
Capital Preservation is the income-first approach. Interest and dividends from every holding sweep to the cash bucket and are spent first, before any principal is touched. When income alone doesn't cover the gap, the tool draws down principal in bucket order — cash first, then short-term bond, then core bond, then TIPS, then any custom funds, then equity last. Bond principal stays flat as long as income keeps up. The analogy is spending the "fruit" (income) and preserving the "tree" (principal). Equity is never sold as long as any other bucket has anything left.
Time Segmentation organizes the same buckets by time horizon instead of by income. Nothing sweeps to cash; everything compounds within its own bucket — bonds growing in the medium-term bucket, equity growing in the long-term one. Withdrawals still follow the same bucket order (cash → short-term bond → core bond → TIPS → custom funds → equity), but you're spending the "next in line" bucket rather than living off income. Think of it as giving each bucket a job and letting it do that job fully, rather than siphoning income from all of them into one pile. The difference from Capital Preservation is visible especially in rising-rate environments, where bonds' price return stays in the bond bucket instead of getting swept to cash.
Total-Return: Proportional treats the portfolio as one integrated pool. Nothing is segmented; everything compounds together, and each year's withdrawal is drawn proportionally across the portfolio by current weight. Total-Return: Rebalancing is similar, but instead of drawing proportionally, it funds withdrawals from whatever is most overweight relative to your target allocation — a natural rebalancing on the way out. Roth assets stay last in line across all four approaches.
The four approaches aren't just labels; each one changes how sequence risk actually plays out. In Capital Preservation, bond fund principal stays flat as long as income covers expenses — that's precisely the "never forced to sell low" protection the strategy is built for. Time Segmentation provides similar bucket-order protection while letting each holding compound at its full return. In either total-return mode, everything is exposed to price movement continuously, which is closer to how most people actually manage a portfolio, but with less built-in cushion against a bad early sequence.
Try all four approaches on the same numbers. Run your scenario under Capital Preservation, then switch to Time Segmentation, then each total-return option — same balances, same spending, same shocks. The difference in outcomes shows you exactly what each approach's sequence-risk protection is actually worth for your numbers.
Starting at 73 (or 75, if you were born in 1960 or later), the IRS requires a minimum withdrawal from tax-deferred accounts, traditional IRA, 401(k), 403(b), and similar plans alike. The percentage climbs every year, not because of anything markets do, but purely because the IRS divisor shrinks as you age, roughly 3.8% at 73, climbing toward 5.3% by 80 and 8.8% by 90 (ouch!). For a large balance, that can mean fully taxable income whether you need it to live on or not, which can push you into a higher bracket, tax more of your Social Security, and trigger IRMAA surcharges on Medicare premiums. But for most people, balances are lower, so a higher percentage matters less.
A Qualified Charitable Distribution (QCD) sends money straight from your IRA to a qualified charity, and it never counts as taxable income at all, while still counting toward satisfying the RMD. A Qualified Longevity Annuity Contract (QLAC) works differently: you commit a lump sum, up to $210,000, from a traditional account, and it comes back out of your RMD-generating balance entirely, effectively reducing your RMD in the near term, in exchange for guaranteed income that starts later, often in your 80s.
Both can be modeled. The Tool computes your actual RMD every year from your entered balances and age, and lets you layer in a QCD, a QLAC, or both, to see the real effect on your taxes and your required withdrawal.
A Roth IRA, or a Roth 401(k) since 2024 under the SECURE 2.0 Act, has no required withdrawals during your lifetime, and nothing you take from it counts as taxable income or affects how much of your Social Security gets taxed. That combination makes it the natural account to hold in reserve, which is exactly how this tool treats it: last in line across all four withdrawal approaches, tapped only after everything else is exhausted.
One thing of note: this tool doesn't model Roth conversions – moving money from a traditional account into a Roth ahead of RMD age to reduce future required withdrawals. That's often a valuable strategy, but it's a decision you can factor into the model (by reducing your traditional IRA balance and increasing your Roth), not something that happens year to year within a retirement income simulation. If conversions are part of your plan, model their effect on your starting balances first, traditional versus Roth, then use those resulting numbers in this tool to see how the withdrawal years actually play out.
Part-time work in retirement and one-time asset sales, downsizing a home, and selling a rental property are all ways to reduce pressure on a portfolio, and all are worth considering. However, these don't enter the model. A one-time expense in a specific year can be input in "Lump-Sum Expenses," but an unplanned one-time inflow, like sale proceeds, or an inheritance, doesn't have a direct equivalent; the closest approximation is entering a lower income need for the specific years that extra income would cover, then reverting it back afterward, an imperfect substitute for a significant one-time cash infusion, but a reasonable way to see the general shape of the effect.
Withdrawal management isn't just technical retirement financial planning; it's deeply theological too. Scripture ties income to God's provision, our stewardship, and our ability to serve and give, and in retirement that income reflects His lifelong faithfulness, your own past stewardship, and continued trust in His provision.
Two behavioral patterns show up often. The first is difficulty actually spending money you spent decades accumulating; reframing a withdrawal as receiving the harvest from seeds planted long ago, and separating essential from discretionary spending, both help. The second is the opposite – overspending in the early, active years without enough regard for a long life and eventual healthcare needs. Neither error is solved by white-knuckling it; both are solved by a solid plan for the whole arc of retirement, not just the early years.
A wise withdrawal strategy should also preserve, and ideally grow, your capacity for generosity throughout retirement rather than slowly squeezing it out. Proverbs 21:5 ties diligent planning to abundance; 1 Timothy 5:8 speaks to providing for your household; 2 Corinthians 9:7 to giving cheerfully. Those aren't separate from the withdrawal math; they're why the math is important.
A few patterns show up again and again in how retirees handle this: claiming Social Security early when it isn't financially necessary, which permanently lowers guaranteed income and puts more pressure on the portfolio. Withdrawing a fixed dollar amount regardless of what markets are doing, rather than letting spending flex with conditions. Drawing from the wrong bucket first and touching equity earlier than necessary, particularly during a downturn, "locking in" losses and taking away the opportunity to recover from a bad stretch in the market. Holding too much in cash for too long, or too little to avoid a forced sale when it matters. And being so conservative that most of the portfolio is still intact at death, having unnecessarily restricted spending and giving along the way.
The withdrawal decision, how much comes out, in what order, and from where, is what retirement income planning is all about. RMDs are mandatory and predictable years in advance; the approach you choose — income-first preservation, time-segmented buckets, or one of the total-return methods — determines how exposed you are to a bad returns sequence; and the value of a Roth account is in its tax avoidance.
This is what stewardship looks like in practice: not hoarding, not overspending, but a plan that honors God, provides for real needs, and keeps room for generosity intact.
See how your own withdrawal order actually plays out. Head to the Tool and run your actual balances, RMDs, and spending needs under any of the four withdrawal approaches, and see exactly which bucket gets touched first, when, and how much you'd owe in tax along the way. And most importantly, see how long your money lasts and what surplus you may have for more generous giving.