A retirement account is a tax-advantaged investment account whose contribution, growth, or withdrawal taxes differ from those of a taxable brokerage account. IRAs and Roth IRAs illustrate two central designs: traditional IRAs generally defer taxation until withdrawal, while Roth contributions are taxed before investment and qualified withdrawals avoid later taxation. section 9.1.1 section 1.2.2
Retirement accounts matter during decumulation because withdrawal choices affect taxes and portfolio longevity:
- Compare traditional IRA and Roth IRA outcomes using X(1+r)^T(1−τT) for the traditional IRA and X(1+r)^T(1−τ0) for the Roth IRA. section 9.1.1
- Prefer traditional IRA treatment when future tax rates are expected to fall, and Roth treatment when rates or the investor’s tax bracket may rise. section 9.1.1
- Model withdrawals alongside taxable accounts: taxable-first, IRA-first, filling a tax bracket, and Roth conversion produce different asset lifetimes. section 9.2.6 section 1.2.2
Roth conversion during decumulation
An investor can withdraw from a traditional IRA up to the top of the 12% tax bracket, convert that amount to a Roth IRA, and spend from the taxable account until it is depleted. The conversion preserves tax-advantaged status but creates current taxes; converted funds generally face a five-year holding rule, and early withdrawal before age 59½ can trigger a 10% penalty on converted principal. Under stated assumptions, this strategy extended savings to 53.2 years, versus 48.7 years for taxable-first withdrawals. section 9.2.6
Table 9.5 Comparison including the Roth conversion strategy
| Strategy | Number of years money lasts |
| IRA first, then taxable | 40.0 |
| Taxable first, then IRA | 48.7 |
| Fill 12% bracket first | 44.5 |
| Roth conversion | 53.2 |
Compare modeled longevity across IRA-first, taxable-first, bracket-filling, and Roth-conversion strategies. section 9.2.6
