The 'Take That, Uncle Sam' Rule of Retirement Spending

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Here's how to reduce your tax bill when you withdraw money in retirement.

By Donna Fuscaldo published 30 January 2026 in Features

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Death and taxes are life's two certainties, but what if you could have more control of the latter in retirement? That’s the goal of the "Take That, Uncle Sam" rule of retirement spending.

With this approach, money is withdrawn strategically to limit your tax exposure. The less you pay Uncle Sam, the more you have to spend or leave to your heirs.

It’s a strategy any retiree can use, but timing is everything. Those who spend more early in retirement must structure their plans differently from those who wait until later.

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Either way, the goal remains the same: Keep as much of your hard-earned savings as possible without running afoul of the law.

"It makes a big difference if you've got all these taxes like IRMAA and RMDs hitting you at different times," said Steve Parrish, professor of Practice, Retirement Planning at The American College of Financial Services.

What taxes are the 'Take That, Uncle Sam' rule worried about?

When it comes to the taxes that the "Take That, Uncle Sam" strategy aims to limit, they include the following:

Ordinary income: Most withdrawals from traditional IRAs and 401(k)s in retirement are taxed as ordinary income, just like a paycheck.

IRMAA surcharge: If your annual income exceeded $109,000 (for single filers) or $218,000 (for joint filers) in 2024, you are on the hook for an IRMAA surcharge on your Medicare premiums in 2026. (There is a two-year "look-back" period for determining whether you must pay the surcharge.)

Required minimum distributions (RMDs): Once you reach age 73, you're required to take annual withdrawals from your traditional IRA. These RMDs can easily push you into a higher income tax bracket.

Keep in mind that tax planning and retirement spending can get complicated quickly, depending on your assets, account types, income streams and how you want to spend your money.

That's why it might be in your best interest to work with a tax professional or a financial adviser — or at least, a trusted friend, family member or an online financial planning tool.

"I don't recommend anyone DIY this unless they know taxes," said Julie Williams, wealth adviser at Wealthspire. "Taxes layer on themselves."

Breaking down the 'Take That, Uncle Sam' rule

Now that you understand some of the tax levers at work, here's the "Take That, Uncle Sam" rule in action, whether you want to spend money in the go-go or slow-go years.

Spending during the go-go years

If you plan to spend a lot in the early years of retirement and your withdrawals will push you into a higher income bracket that creates a big tax event, the "Take That, Uncle Sam" approach could be for you.

Parrish says in that case, you withdraw from your Roth IRA first to avoid paying any taxes. After that, you tap your brokerage account and IRA. Once your spending slows down, you stop withdrawing from your Roth.

The reason to tap your Roth IRA? Withdrawals are tax-free. The downside: You're giving up future tax-free growth. It means heirs won't receive as big a tax-free inheritance. Nonetheless, Parrish said it could be worth it if you faced a big tax bill.

Keep in mind that this approach won't reduce your RMD exposure, since you aren't touching your traditional IRA. Your RMDs could be larger if your balance continues to grow.

To get around that, try a hybrid approach in which you withdraw just enough from your traditional IRA to stay in your existing tax bracket and take the rest from your Roth. You can lower your RMDs, but you will have to pay some income tax.

Spending during the slow-go years

If you expect to withdraw more money later in retirement and want to avoid a big tax hit, do the reverse: Withdraw from your traditional IRA up to the top of your tax bracket, and if you need more, take it from your brokerage account, said Parrish.

The reason to tap your traditional IRA first? Typically, you're in a low tax bracket in retirement, so the tax hit is minimal. It also gives you a chance to reduce your RMDs. The downside: You have to pay some taxes on withdrawals.

Do that year after year, then move to your Roth. When it comes time to make large withdrawals later, the money will be tax-free.

"The nice part is you burn up some of your IRA when it comes time to take your RMDs," said Parrish.

It isn't an exact science

At the end of the day, tax planning for retirees isn't about avoidance; it's about minimizing the amount you owe. It's about making those tax-smart moves, particularly when you begin withdrawing the money you worked so hard to save.

"It’s about what you can do today to keep more money in your pocket for your entire family, the next generation and your lifetime," said Williams.

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Donna FuscaldoSocial Links NavigationRetirement Writer, Kiplinger.com

Donna Fuscaldo is the retirement writer at Kiplinger.com. A writer and editor focused on retirement savings, planning, travel and lifestyle, Donna brings over two decades of experience working with publications including AARP, The Wall Street Journal, Forbes, Investopedia and HerMoney.