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For years, retirees have been told the same thing: Protect your Roth IRA at all costs. Let it grow. Don’t touch it. Save it for last. And in many cases, that advice holds up.
But if you’re among a small group of Americans with both a pension and $1 million or more saved, the rules change. What works for the average retiree doesn’t always apply to what we often call the “2% Club.” (I wrote a book about this group, which you can request here.)
In fact, there are specific moments when tapping your Roth IRA earlier can be strategic and save money on taxes. Here are eight situations where it may make sense to take withdrawals from your Roth, even if you’ve spent years trying to build it.
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1. When tax rates are higher than expected
Roth assets shine brightest when tax rates rise. If future tax policy shifts, or increases in your personal income push you into higher tax brackets, pulling from your Roth allows you to avoid those elevated rates.
While today’s tax environment is historically low, retirees with pensions often find themselves in equal or higher brackets later in life. That’s when tax-free income becomes especially valuable.
2. When you’re near the top of a tax bracket
Small decisions can have outsized tax consequences. If an additional $10,000 withdrawal from a traditional IRA would push you into the next tax bracket, it may be smarter to take that amount from your Roth instead.
This strategy helps you “cap” your taxable income and avoid paying a higher marginal rate on dollars that could have been tax-free.
Think of your Roth as a pressure valve, used strategically to keep your tax situation under control.
3. During unusually high-income years
Not all retirement years look the same. You may sell a property, receive a large bonus before retiring, cash out unused vacation time or experience another one-time income spike.
In those years, adding more taxable income from traditional accounts can be costly. Roth withdrawals, on the other hand, won’t increase your taxable income, making them a useful tool to maintain flexibility when your income temporarily surges.
4. If you’re using the Affordable Care Act before age 65
Early retirees face a unique challenge: bridging the gap to Medicare. Health insurance through the Affordable Care Act is income-based. The lower your reported income is, the lower your premiums and subsidies may be.
By withdrawing from your Roth instead of tax-deferred accounts, you can generate the income you need without increasing your reported income. This could translate into meaningful savings on health insurance during early retirement.
5. To avoid higher Medicare premiums
Once you reach age 63, another income-based threshold comes into play: Medicare premiums. Known as the income-related monthly adjustment amount (IRMAA), these surcharges can significantly increase your Medicare costs if your income crosses certain limits, even by a small amount.
Higher premiums do not change your coverage. You receive the same Medicare benefits regardless of cost.
Strategic Roth withdrawals can help you stay below those thresholds. In some cases, avoiding a relatively small income increase can save thousands in premiums.
6. To navigate the Social Security ‘tax torpedo’
Few retirees anticipate how aggressively Social Security can be taxed. As your income rises, more of your Social Security benefits become taxable — up to 85%.
This creates what’s often called the “tax torpedo,” where each additional dollar withdrawn can trigger disproportionately high taxes.
Roth withdrawals don’t count toward this calculation, making them a powerful way to access income without increasing the taxability of your benefits.
7. After the loss of a spouse
In these years, Roth withdrawals can help manage tax exposure because they are not taxable. This provides flexibility when traditional income sources become less efficient.
Also, consider Roths when planning for your heirs
Roth strategies don’t end with your lifetime — they extend to your legacy. Under current rules, most non-spouse beneficiaries must withdraw inherited retirement accounts within 10 years. If those assets are in traditional IRAs, every dollar withdrawn is taxable.
But Roth accounts? Those distributions are generally tax-free. If your children are in higher tax brackets, or you expect them to be, preserving Roth assets for inheritance while spending from other accounts can create a more efficient wealth transfer.
The bigger picture: Flexibility over rules
For retirees with pensions and significant savings, the biggest risk isn’t running out of money — it’s losing control over how and when that money is taxed. That’s why tax diversification matters. Having assets across taxable, tax-deferred and tax-free accounts gives you options.
In retirement, options are what allow you to adapt to tax law changes, income fluctuations and life events. In the end, the goal isn’t just to build wealth, but to use it wisely. So while Roth IRAs don’t always have to be spent early, they should always be used strategically.
