How Do I Take Distributions In Retirement?
How Do I Take Distributions In Retirement?
According to research from the Alliance for Lifetime Income, more than 4.1 million Americans will turn 65 this year, and an additional 4 million will hit this milestone in 2027. If you are one of the millions considering leaving the workforce, you've likely spent decades saving. Once you stop working, your focus shifts from putting money in to taking it out. As retirees transition from accumulation to distribution mode, they face uncertainty. Shifting from saving to spending requires balancing immediate needs with long-term security. Read on to gain confidence in making distribution decisions during retirement.
Retired on Monday
Before you figure out how to take money out of your retirement account, you first need to know how much to withdraw. So, imagine you retire next Friday and will no longer receive a paycheck. What will happen on Monday? Most people do not carefully track their day-to-day expenses. If that's you, you're not alone. However, budgeting is an important exercise to help you understand the costs of essential items such as housing, food, clothing, health care, and transportation. Then layer in lifestyle spending on travel, dining out, hobbies, and other leisure activities. Once you have that total, calculate the amount of other income you will receive, perhaps from social security or a pension. The amount remaining is the gap you'll need to fill from your retirement savings.
Types and Location of Accounts
If you've ever changed jobs, you may have multiple retirement accounts. Qualified retirement accounts like 401(k), 403(b), SIMPLE, or SEP IRA, may have been funded primarily with tax-deferred income so that any distributions would be taxed at ordinary income rates. You can rollover these accounts into one Traditional IRA. The other types of retirement savings vehicles you may have are Roth IRAs, Health Savings Accounts (HSAs), or Investment Accounts. You fund investment and Roth IRAs with after-tax dollars. Distributions from investment account are only taxed on the capital gains rates, and qualified withdrawals from Roth IRAs and HSA are completely tax-free.
Setting Up Your Distributions
Once you have a strategy in place to begin taking distributions, you'll contact your account custodian (the brokerage or financial institution holding your IRA or other account) to begin the distributions. You'll specify the amount, how frequently you want to receive payments, and where the funds should go, usually a linked bank account.
Most custodians allow you to automate your withdrawals. Automating takes the guesswork out of remembering to make withdrawals, helps you budget around a predictable income stream, and reduces the temptation to make emotionally driven decisions when markets get rocky. As for timing, monthly distributions mimic the rhythm of a paycheck, making budgeting for day-to-day expenses easier.
Avoid These Common Mistakes
Even well-prepared retirees stumble. Withdrawing from accounts in an inefficient order, missing RMD deadlines, failing to plan for taxes on distributions, and neglecting to update beneficiary designations are among the most costly errors. These mistakes can significantly reduce the wealth you've worked a lifetime to build.
Practical Next Steps
Transitioning from saving to spending is a significant shift both emotionally and financially. The good news is that with thoughtful planning, you can take distributions in a way that balances your lifestyle today with financial security for the long haul. A financial advisor can help you map out a personalized strategy that accounts for your unique situation, goals, and the tax landscape you'll navigate in retirement. If you don't have a financial advisor, contact the fiduciary team at Hurlow Wealth Management Group (812-333-4726) or click here to schedule a free consultation today. For over two decades, our fiduciary financial advisors have helped Midwest Millionaires find clarity, make decisions with confidence, and achieve comfort in retirement.
Sources:
- Alliance for Lifetime Income. Peak 65: The Retirement Income Crisis. https://www.allianceforlifetimeincome.org
- Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs). https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
- Internal Revenue Service. Health Savings Accounts and Other Tax-Favored Health Plans. IRS Publication 969. https://www.irs.gov/publications/p969
- Internal Revenue Service. Topic No. 409: Capital Gains and Losses. https://www.irs.gov/taxtopics/tc409
- Internal Revenue Service. Rollover Chart. https://www.irs.gov/pub/irs-tege/rollover_chart.pdf
- Consumer Financial Protection Bureau. Planning for Retirement. https://www.consumerfinance.gov/consumer-tools/retirement/
- Anthropic. Claude AI (Version: Claude Sonnet 4.6). Anthropic, PBC, 2025. Accessed Feb 25-27, 2026. https://www.claude.ai
Usage Note (for transparency/disclosure):
Claude AI was used to assist in developing the structural outline for this article and identifying relevant sources. All sources were independently verified, and final content reflects the review and editorial judgment of Hurlow Wealth Management Group.