Podcast Summary: BiggerPockets Money Podcast

Episode: The Ultimate Guide to Early Retirement Drawdown (2026)
Air Date: December 9, 2025
Hosts: Mindy Jensen and Scott Trench
Purpose:
A deep-dive into advanced decumulation (drawdown) strategies for those pursuing FIRE (Financial Independence, Retire Early). The hosts break down the primary approaches to retirement withdrawals, address tax optimization, give practical examples, and share new thinking relevant to those who have mostly focused on asset accumulation so far.

Episode Overview

This landmark 700th episode focuses squarely on how to spend down (decumulate) your investment portfolio without running out of money, while minimizing taxes and maximizing what you leave to heirs or charity. The conversation assumes listeners already have substantial assets and are seeking nuanced, actionable strategies to fund decades-long retirements.

Key Discussion Points and Insights

1. Why Decumulation is Harder Than Accumulation

• Main Message: “Building a $2.5 million portfolio is hard. Spending it without running out is even harder.” (A, 00:00)
• Most episodes have focused on accumulation; now the focus is on the mindsets and mechanics of spending assets—something 80% of their listeners have never practiced before (B, 04:14).
• Practical Tip: Try a “test fund” (e.g., $10,000) to physically practice withdrawals and get over the psychological hurdle of selling.

2. Listener Feedback and Corrections

• Nuances on inheriting HSAs: Non-spouses can pay medical bills from the decedent within a year of their death (B, 01:22).
• Clarification of other experts’ views (Cody Garrett, Sean Mullaney, Mark Bakewell): All generally agree to use up standard deduction and 0% long-term capital gains brackets when optimizing withdrawal strategies (B, 02:30).

3. Fundamental Goals of Decumulation

• Primary Goal: Don’t run out of money in retirement (B, 06:00).
• Secondary Goal: Maximize after-tax estate value (pass more to heirs/charity if possible) (B, 06:47).
  • “I would much rather leave $10 million, although I might want to spend a little bit more during my living years.” (A, 06:47)

4. Portfolio Diversification For Withdrawal

• In accumulation, all-stock portfolios may be ideal; in decumulation, diversification (including bonds, alternatives, gold, managed futures, international stocks) helps protect against sequence-of-returns risk (B, 07:16).
• Golden Ratio Portfolio (Frank Vasquez): 42% stocks, 26% bonds, 16% gold, 10% managed futures, 6% international. Mindy tested this live and found it outperformed even after regular withdrawals (A, 09:04).
• Tip: “Take $10,000 and start withdrawing from it... to build that habit. I think it will make a big difference.” (B, 10:31)

5. Tax Treatment of Account Types in Retirement

(B, 14:40)

• Roth IRA: Post-tax in, tax-free growth & withdrawal, best for inheritance.
• After-Tax Brokerage: Favorable for early retirees—0% capital gains up to significant limits; stepped-up basis for heirs.
• Tax-Deferred (401k): Tax on withdrawal as ordinary income, not as advantageous for heirs (ordinary income over 10 years).
• HSA: Highly efficient for you (tax-free withdrawals for qualified expenses), worst for heirs unless used for prior year medical bills.

6. Investment Order of Operations (During Accumulation)

• 1. $1,000 cash buffer
• 2. Pay off bad debt
• 3. Take 401k match/ESPP
• 4. Build 6mo emergency fund
• 5. Max out HSA
• 6. Max out 401k, then Roth IRA
• 7. After-tax contributions
• Decumulation is NOT the reverse (A, 19:32).

Retirement Drawdown Strategies (with Examples)

1. Sequential Drawdown

(A, 21:06)

• Order: After-tax accounts → 401k withdrawals (direct or via 72T/Roth conversion ladder) → Roth IRA → HSA.
• Advantage: Early years can be spent in a 0% income tax bracket.
• Pitfall: Risk of a "tax bomb" from required minimum distributions (RMDs) at 73 or 75 if tax-deferred accounts balloon.
  • “If you are one of these people who has a large 401k... you risk having this kind of a tax bomb hit.” (B, 22:26)
• Example Calculation:
  • Year 1: $64K from brokerage, $0 taxes due to 0% LTCG bracket.
  • Year 2: $64K from 401k, ~$5.5K taxes due to ordinary income treatment (A, 24:25).

2. Blended Drawdown

(B, 26:08)

• Order: Withdraw some from pre-tax accounts (up to standard deduction), and some from after-tax (to max out 0% capital gains), then move to Roth/HSA.
• Philosophy: “Never waste the standard deduction and never waste the 0% marginal tax bracket on capital gains and qualified dividends.” (B, 26:08)
• Example Calculation:
  • $64K/year: $32K from each of 401k and brokerage.
  • Total tax over 2 years: $3,423 (vs $5,552 with sequential, i.e., $2K+ in savings) (A, 33:57).
• Important Note: This is not always best; your personal tax position, portfolio, and state taxes all matter.

3. RMD Suppression Strategy

(B, 38:27)

• Order: Withdraw aggressively from pre-tax accounts (perhaps up to the top of the 12% bracket), even if you don’t need the money; then spend after-tax, then Roth, then HSA.
• Purpose: Reduces forced RMDs at higher brackets later; “insurance” against higher future tax rates.
  • “There's a real chance a million and a half in my 401k could swell to 4, 5, 6 million if I go with sequential... I'd rather take money out on my own terms, not because the government is telling me you have to do this.” (A, 41:47)
• For whom: Especially suitable for those well past their FIRE goal with large pre-tax balances or strong income prospects.

Advanced Tools and Techniques

72T (Substantially Equal Periodic Payments)

• Allows pre-59.5 access to IRA/401k without penalty; must be maintained for >5 years or until 59.5, whichever is longer (A, 46:53).
• “The 72t rule scares me... you could roll over $100,000 out of your 1.4m 401k... and layer that in.” (B, 47:44)

Roth Conversion Ladder

• Convert traditional IRA/401k to Roth in low-income years, pay manageable tax, then withdraw principal from Roth tariff-free after 5 years.
• More flexible for those with longer retirement horizons.

Decumulation Optimization Tips

• Place aggressive investments in Roth/HSA; more conservative in pre-tax; balanced in after-tax. (B, 43:07)
• Try a “decumulation test fund” ($10k, $40/month withdrawals) for hands-on learning.
• Early retirees generally enjoy low taxes until RMDs or Social Security (B, 43:07).
• Having a paid-off home helps reduce withdrawal needs and risk, letting you optimize tax brackets and ride out market downturns.
• Sequence-of-returns risk: Use cash positions and flexibility in spending.

Notable Quotes & Moments

• “Most of the assets pass to the spouse pretty well. That's not always the case...” (B, 01:22)
• “If you want to decumulate, you'll have to be comfortable selling a stock.” (B, 04:14)
• “I had never sold a stock before to fund consumption... it is a little bit different to go in and just hit sell.” (A, 11:24)
• “Never waste the standard deduction and never waste the 0% marginal tax bracket.” (B, 26:08)
• “Your tax position and your portfolio is specific to you.” (A, 33:57)
• “There's going to be a lot of 'It Depends' work here.” (B, 50:23)

Timestamps to Key Segments

| Time | Segment | |--------|-----------------------------------------------------------------| | 00:00 | The problem: Spending down a portfolio is hard | | 01:22 | Corrections: HSA inheritance and expert approaches | | 03:56 | From accumulation to drawdown—a new phase | | 09:04 | The Golden Ratio decumulation portfolio (Frank Vasquez) | | 14:40 | Account tax treatment in retirement | | 19:32 | Accumulation order of operations; why decumulation is different | | 21:06 | Sequential drawdown explained | | 26:08 | Blended drawdown explained | | 38:27 | RMD suppression approach explained | | 46:53 | 72T and Roth Conversion Ladder explained | | 50:23 | Final takeaways, conclusion, and listener feedback plea |

Final Takeaways

• There’s no one-size-fits-all answer. Your withdrawal order and investment approach should be tailored to your tax profile, portfolio composition, and emotional inclinations.
• “It depends” is the right answer—be opportunistic and strategic annually.
• Practice now: set up a trial decumulation portfolio to ease the transition from saver to spender.
• Sequence-of-return risk, RMDs, and future tax rates are the biggest threats to FIRE spenders—use tax-advantaged withdrawal plans to mitigate them.
• The hosts encourage ongoing discussion, feedback, and learning as new rules and realities emerge.

For calculators, slides, and resources, visit: biggerpocketsmoney.com/resources