Retiring at 62 With $2.4 Million? The Order You Spend Your 401(k), Roth, and Social Security Is Worth $200,000
Most retirees follow the same account withdrawal sequence without realizing it can quietly hand tens of thousands of dollars to the IRS instead of their heirs. The order you tap your 401(k), Roth, and Social Security turns out to matter…
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The Bogleheads forum has a recurring question from readers at exactly this crossroads: I am 62, I have roughly $2.4 million split across a traditional 401(k), a Roth, and a brokerage account, and I want to retire now. In what order should I spend it? The default answer (taxable first, then traditional, then Roth) is wrong for most people at this balance. Choosing the right sequence, paired with the right Social Security claiming age, can leave a couple with roughly $200,000 more spendable money over a 30-year retirement.
Why the Default Order Costs You
Assume $1.6 million in a traditional 401(k), $500,000 in a Roth IRA, and $300,000 in a taxable brokerage. The conventional playbook drains taxable, then traditional, then Roth. That approach preserves tax-deferred growth, but it packs your 401(k) withdrawals into your late 70s and 80s, right when RMDs kick in and Social Security is already flowing. Every late-life traditional dollar stacks on top of the benefit, drags up to 85% of Social Security into the taxable column, and can trigger Medicare IRMAA surcharges two years later.
Suze Orman describes the mechanic bluntly: “Money you withdraw from a traditional IRA or a traditional 401(k), 403(b), or TSP counts as income when calculating whether you will pay tax on your Social Security. It also determines your Medicare Part B premiums, and they will be higher because of it.” Roth withdrawals, she notes, do not count toward either calculation.
Why the 62-to-70 Gap Years Are the Whole Ballgame
Retire at 62 and delay Social Security to 70, and you create an eight-year window with almost no taxable income. That window is the most valuable tax-planning space you will ever have. Use it.
Under current rules, a married couple filing jointly hits the top of the 12% bracket at $96,950 of taxable income and the top of the 22% bracket at $206,700. Layer in the standard deduction plus the age-65 add-on (roughly $33,000 for a couple over 65) and you can pull about $127,000 out of the 401(k) each year and stay inside the 12% bracket.
Do that for eight years and you have moved roughly $1 million out of the traditional account at a blended federal rate near 10%. Wait until 73 and RMDs force the same dollars out on top of Social Security, and much of it will be taxed at 22% or 24% federal plus the Social Security torpedo. That spread, compounded across two decades, is where the $200,000 figure comes from (we sized up this quiet window between your last paycheck and your first RMD in a free Roth conversion guide if you want to run the math on your own numbers).
Watch the IRMAA Trap Starting at 63
Medicare uses a two-year income lookback. Your Part B premium at 65 is based on the return you file at 63. Cross the first IRMAA threshold (roughly $212,000 of MAGI for a couple in 2026) and each spouse pays a surcharge that can run several hundred dollars a month. A single oversized Roth conversion at 63 or 64 can cost $3,000 to $8,000 in Medicare premiums two years later. Fill brackets. Do not blow past them.
Social Security Math Still Favors Waiting
Delayed retirement credits add 8% per year between full retirement age and 70. The 2027 COLA is tracking toward 3.1%, stacked on top of whatever base benefit you lock in. For a healthy 62-year-old with a working spouse and a family history of longevity, claiming at 70 rather than 62 is often worth six figures in lifetime benefits and doubles as the cheapest longevity insurance you can buy.
Three Actions to Take This Month
- Build a bracket-filling schedule. Calculate the exact withdrawal or conversion that tops out the 12% bracket at $96,950 or the 22% bracket at $206,700 for joint filers. Ladder 401(k) distributions or Roth conversions to that ceiling every year from 62 until RMDs begin.
- Model IRMAA cliffs before converting. If projected MAGI at 63 or 64 approaches the first Medicare threshold, stop the conversion. The premium surcharge that lands two years later routinely erases the tax arbitrage you were chasing.
- Park two years of spending in short Treasuries or top-yield CDs. The 10-year Treasury is near almost 5%, and the best online 12-month CDs pay several times the roughly 2% national average. A cash bucket keeps you from selling equities in a drawdown while the bracket-filling strategy runs.
One footnote for anyone still working at 62 and planning a final push: if you earned more than $150,000 in 2025, your 2026 catch-up contribution (up to $11,250 for ages 60 to 63) must go into the Roth side of the plan. Treat it as a free head start on the Roth bucket you will need in your 80s.
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Jake has been been working in financial media for almost 15 years. He focuses on all things personal finance for 24/7 Wall St. with high hopes to educate and entertain. Most recently, Jake spent 12 years working various roles at The Motley Fool. He started copy editing fool.com content, worked on premium and marketing campaigns, and helped launch The Ascent, a personal finance brand.
His work has been featured on platforms like MSN, Yahoo Finance, USA Today, and more. He's written about credit cards, social security, ETFs, savings accounts, and just about anything else you can imagine when thinking about money. Jake love to cook, play golf, and tell people he's never had a cavity. (It's true!)
