BiggerPockets Money Podcast

Episode: The Four Fundamentals of Retirement Drawdown
Date: September 26, 2025

Overview

This episode of the BiggerPockets Money Podcast, hosted by Mindy Jensen and Scott Trench, explores the critical “withdrawal order of operations” for retirees. Special guests Sean Mullaney (the FI Tax Guy) and Cody Garrett, CFP (Measure Twice Financial), share their expertise on managing the decumulation phase of retirement. They break down the ideal sequence for drawing down your various accounts to minimize taxes and optimize for other important goals including healthcare costs, lifestyle spending, and legacy.

Key Discussion Points and Insights

1. The Four Fundamentals of Retirement Drawdown

[01:27 – 03:22] Sean Mullaney

Sean introduces a clear framework for withdrawing from your portfolio in retirement:

• Spend taxable accounts first: Start with your non-retirement brokerage and savings accounts.
• Then spend traditional retirement accounts: Such as pre-tax 401(k)s and traditional IRAs.
• Delay Social Security to age 70: Especially beneficial for higher earners, single individuals, or the higher-earning spouse.
• Use tax-free accounts strategically (Roth, HSA): Tap these to manage taxes, control income for ACA healthcare credits, or fund large one-off expenses.

“In a theoretical ideal world, we would draw down with the following four rules... spend taxable accounts first... then traditional retirement accounts... delay Social Security until age 70... use tax-free pools like our HSAs and our Roths strategically.”
— Sean Mullaney [01:27]

2. Retirement Phases and Their Tax Implications

[03:38 – 07:15] Sean Mullaney and Mindy Jensen

Sean and Cody map the retirement journey into five phases, each with distinct planning concerns:

• Phase 1: From retirement date to depletion of taxable accounts.
• Golden Years (Phases 2-3): Typically ages 66–69 (or up to start of RMDs at 70-75), allow for advanced tax and withdrawal planning.
• RMDs Begin (Phase 4): Required withdrawals start at 70-75; planning shifts focus.
• Widow/Widower Years (Phase 5): Tax rates may increase after one spouse passes.

Why Spend Taxable Accounts First?

• Favorable tax treatment of capital gains and “basis recovery.”
• Mitigates sequence-of-returns risk: Lower taxable income early in retirement helps absorb market downturns.
• Reduces dividend taxes: Potential to avoid triggering taxable dividends.
• Asset protection: Tax-deferred accounts usually have better legal protections than taxable accounts.

"Why spend down a creditor protected asset when you could spend down a non creditor protected asset?"
— Sean Mullaney [06:51]

3. Early Retirement—ACA Premium Tax Credits and Withdrawal Strategy

[10:22 – 16:22] Sean Mullaney and Cody Garrett

For early retirees not yet on Medicare, ACA (Affordable Care Act) premium credits are crucial. Drawing from taxable accounts and possibly Roth or HSA can keep your “income” (as reported for ACA purposes) artificially low, maximizing potential health insurance subsidies.

• Tactics:
  • Use asset location: Place bonds in traditional accounts, use tax-efficient assets in taxable.
  • Use specific identification for sales to minimize capital gains.
  • Consider turning off dividend reinvestments for more control.
  • Contribute to HSAs if eligible (especially easier as of 2026).
• Roth Conversions: Can be useful, but be cautious—extra “income” can reduce your premium tax credit.

“I have never seen Roth conversions make or break a retirement...”
— Cody Garrett [13:04]

"You might want to do a Roth conversion to just get to the level needed to turn on the premium tax credit..."
— Sean Mullaney [16:22]

4. The “Golden Years” and Roth Conversion Opportunity

[16:22 – 22:21] Sean Mullaney and Cody Garrett

When premium credits are not a factor (typically after age 65), retirees may have a window to maximize Roth conversions up to the available standard/senior deductions—paying little or nothing in tax on those conversions.

• Tailored Taxable Roth Conversions (TTRCs): Convert amounts so that your taxable income doesn’t spill into higher tax brackets or cause capital gains to be taxed above 0%.

“We want to leave our total taxable income no greater than the top of the zero percent long term capital gains tax bracket.”
— Sean Mullaney [16:22]

• Spousal Age Gaps: Hybrid strategies may be needed if spouses are at different phases.

5. Asset Location – Where to Place Bonds and Stocks

[61:14 – 62:16] Scott Trench, Sean Mullaney, Cody Garrett

To maximize long-term tax efficiency:

• Put stocks in Roth/HSA (maximize growth in tax-free accounts).
• Put bonds in traditional/pre-tax accounts (lower expected growth).
• Taxable accounts for domestic equities: Limiting ordinary income generation.

“Your general approach is about the best way folks can do that and... you’re definitely barking up the right tree.”
— Sean Mullaney [61:44]

6. RMDs (Required Minimum Distributions): Fear vs. Reality

[40:45 – 50:37] Sean Mullaney and Cody Garrett

• RMDs start at age 75 for those born in 1960 or later.
• RMDs are often less onerous than feared; they last only a short phase and are mitigated by earlier withdrawals, asset choices, Roth conversions, and Qualified Charitable Distributions (QCDs).

“RMDs sort of have this rap as being this bad thing and boy, they're going to hurt your retirement… we find they're generally not all that detrimental and if they're detrimental, it also has the happy accident of oh, you're really rich...”
— Sean Mullaney [47:35]

7. Widow(er)’s Tax Trap and Legacy Planning

[50:37 – 54:40] Sean Mullaney and Cody Garrett

• The “widow(er)’s tax trap” refers to higher tax rates for surviving spouses due to loss of joint-filing benefits.
• Even large RMDs tend to be taxed at manageable rates.
• Most planning techniques to reduce RMDs (Roth conversions, QCDs, asset location) also mitigate widow(er) tax issues.
• The true problem is a “good” one: having so much money that higher taxes are the result.

“We say the word ‘penalty’ in a lot of cases… we kind of create this language to make this stuff sound way more intense than it is…”
— Cody Garrett [48:14]

Notable Quotes & Memorable Moments

• On shifting from accumulation to decumulation:
  "Assets tend to become income very efficiently... retirement could be the best tax cut of your life." — Sean Mullaney [55:29]

• On living life, not just optimizing taxes:
  “Unrealized capital gains can also mean unrealized experiences in life.”
  — Cody Garrett [49:59]

• On DIY vs. professional tax planning:
  "I don't think that they should be DIY-ing their tax planning... you need to have a conversation with somebody for whom this is second nature."
  — Mindy Jensen [56:50]

• On rational, not fear-based planning:
  "We're also for planning done in the context of rational analysis, not in the context of fear and slogans."
  — Sean Mullaney [56:37]

Timestamps for Important Segments

• [01:27] – The four fundamentals of retirement drawdown
• [03:38] – Retirement phases explained
• [04:27] – Why prioritize taxable account withdrawals
• [10:22] – ACA premium tax credit strategies for early retirees
• [13:04] – Roth conversions: when to do them and when not to
• [16:22] – Tailored Roth conversions during “golden years”
• [22:21] – What to do after taxable accounts run out
• [24:47] – The “hidden Roth IRA” effect of standard deductions
• [40:45] – Strategies to mitigate RMDs
• [47:35] – Are RMDs really a problem?
• [50:37] – Widow(er)’s tax issues and effective mitigation strategies
• [55:29] – Most retirees pay less tax than they fear
• [61:14] – Practical application for asset allocation in different accounts

Final Takeaways

• Don’t let taxes drive every decision: The primary goal is to live the lifestyle you want; taxes are only one factor.
• Spending order matters: Taxable → Traditional → Roth/HSA, with strategic exceptions.
• Delay Social Security (when feasible): Often maximizes long-term benefits and minimizes taxes.
• Healthcare costs require proactive planning: Keep taxable income low before Medicare to optimize ACA subsidies if you're retiring early.
• Asset location is key: Maximize growth in tax-favored accounts; minimize ordinary income in taxable accounts.
• Widow(er) tax trap is manageable: Bear in mind, increased taxes usually mean you have substantial wealth.
• Consult a professional, but know the basics: DIY can only take you so far—partner with a knowledgeable tax strategist.

Resources & Where to Learn More

• Book: "Tax Planning To and Through Early Retirement"
  Measure Twice Financial Book Link
• Sean Mullaney: FI Tax Guy Blog

End of summary.