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Greetings, Loreng4779, and welcome. You wrote:

<<My retirement funds are 40% taxable, and 60% tax-deferred (IRA etc). Does anyone have a formula, calculator, or even a rule-of-thumb to guide me in determining which I should take distribution from first for retirement living expenses. I'm 66, the IRA is of a size that would make minimum required distributions at age 70 probably taxable at 28% and some of social security benefits taxable too. My first instinct is to take the regular investments first and let the IRA grow tax-deferred; but it might be better to take from IRA now to keep required minimum distribution lower when that time comes. Any help?>>

The old rule of thumb used to be to draw down your taxable investments first to allow continuation of tax deferred compounding within IRAs as long as possible. I'm in the middle of a study now, though, based on a hypothetical long-term buy and hold investor with !/3 of a portfolio in a taxable account and 2/3 in an IRA. Assuming a withdrawal rate of 5% of the initial portfolio that increases with inflation each year, the study is indicating that for overall tax impacts (during and after life), the total tax burden to the family is less taking the distribution from the IRA first. Obviously, much depends on withdrawal rates and the rates of return in the taxable account versus that of the IRA. Still, when assuming the same rate of return in both the taxable and the IRA, my preliminary results indicate the family is better off if the money comes first from the IRA that's taxed at ordinary rates.

All you can do is make your assumptions, and then run the spreadsheet comparisons to see what it looks like in your case.

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