Optimal withdrawal strategies are developed for retirees with multiple types of
tax-advantaged savings accounts. In an environment of progressive tax rates, the
ability to convert pretax funds in traditional IRAs at low tax rates
substantially increases investors’ residual accumulations and withdrawal
sustainability. Specifically, informed withdrawal-location strategies, in which
traditional IRA distributions can be applied against exemptions, deductions, and
lightly taxed tax brackets, can increase residual accumulations by more than $1
million. In these strategies, the optimal tax bracket through which an investor
should take distributions is directly related to the investor’s wealth
level.