If you're in your first year of living off savings, the retirement withdrawal mistakes to avoid, says Tolleson Wealth Management, start with selling stocks in a down month and spending your Roth first. The main exception is a year when bonds fell along with stocks: switching funds then saves little, and a short spending trim protects the shares better.
We wrote this for someone who has just swapped a paycheck for account withdrawals, especially if retirement came after ten to 15 years of saving and catch-up contributions. If you are still building your retirement accounts, the monthly mechanics can wait, though the Roth growth example applies to you too. Every question here came up in first meetings Tolleson Wealth Management has had with retirees who want travel and family spending to fit a portfolio that now pays the bills.
“A fixed check every month is the safe way to avoid retirement withdrawal mistakes”
A fixed draw is predictable for your bank account, but it can force the wrong sale inside your investment account. Many 403(b) and 401(k) withdrawal forms default to a pro rata sale, meaning every fund is sold in the same proportion. That includes stocks when they are down. The safer first-year habit is to choose the source of the withdrawal before the money leaves the account.
For illustration, Astrid, a hypothetical 68-year-old widowed former university librarian, opens her quarterly 403(b) statement. Her stock fund fell 20 percent, from $400K to $320K; her bond fund still holds $250K, so the $650K portfolio is now $570K. She wants $20K for a fall trip to Norway. Selling $20K from the stock fund means selling shares that were worth $25K in January: $20K ÷ 0.80 = $25K. Drawing $20K from bonds leaves those shares in place; if prices return to January levels, which is not guaranteed, those shares would again be worth $25K.
Selling the stock fund first during a drop and touching bonds only after stocks recover is a mistake of order: Astrid’s $20K trip would cost $25K of January-value shares, a $5K gap for each $20K raised. In a down year, Tolleson Wealth Management directs the monthly draw and one-off spending to the bond fund, then holds the guardrail. No spending raise applies while the total portfolio remains below its starting value, so Astrid spends $12K now and holds the remaining $8K for next year.
A separate surprise sits on the withdrawal form. A one-off $20K 403(b) payout is an eligible rollover distribution, so the plan must withhold 20 percent and Astrid receives $16K. To receive $20K, she would request $25K gross; her actual tax could be higher or lower, and her CPA settles that in April. Ask the custodian, “Can I choose which fund a withdrawal comes from?” A pro-rata-only answer deserves attention. Account values can fall below what you put in, and a later price recovery is never assured.
“The Roth is tax-free, so I should spend it first”
A Roth IRA has no required minimum distributions for its original owner, and its tax-free growth makes it a valuable account to preserve for later years or heirs. Spending $50K now gives up about $31K of tax-free growth over ten years, assuming 5 percent annually for illustration: $50K × 1.05^10 is about $81,400. Astrid has no Roth, so she must decide which pre-tax account pays. Tolleson Wealth Management usually looks at the later-life value of Roth dollars before treating them as travel money.
“Nothing needs deciding until I turn 73”
The row labeled “Nothing matters until 73” is where the answer flips. Extra withdrawals taken from age 68 through 72, before RMDs begin, shrink the balance that later RMDs are calculated on. For anyone born in 1960 or later, that window runs to 75. The dates below matter even before you reach RMD age.
January 31 is when the 1099-R for last year’s withdrawals arrives. April 15 is the tax due date and first estimated-tax payment date; June 15, September 15, and January 15 of the following year are the remaining estimated-payment dates. December 31 is the final day for a withdrawal to count in that tax year. The IRS says RMDs begin at age 73, with the first generally due April 1 of the following year; they begin at 75 for people born in 1960 or later.
Waiting until 73 to touch an IRA can waste five lower-tax years. Taking $10K more annually from age 68 through 72 leaves a $50K smaller balance before growth when RMDs are figured. Skipping withholding on $30K of annual monthly draws creates a $4,500 April bill at an assumed 15 percent combined rate, for illustration. A beneficiary form that still names a late spouse is another costly delay, because that form overrides a will. Tolleson Wealth Management also checks beneficiary confirmations before discussing a larger withdrawal.
A payout can sometimes be redeposited within 60 days, though replacing the 20 percent withheld requires other cash. You can change withholding elections and beneficiary forms, but you cannot reverse shares sold low, a missed December 31, or a tax return already filed in a higher bracket. Gather quarterly statements from the custodian website, the mailed 1099-R, beneficiary confirmations, the state pension’s annual benefit letter, and last year’s Form 1040. This is general education, not tax or investment advice for your accounts.
| Common belief | What the rule says | What it means for you |
|---|---|---|
| Same check every month is safest | Plans often sell funds pro rata | Draw from bonds in down years |
| Spend the Roth first | Roth IRA has no owner RMDs | Save Roth dollars for later |
| Nothing matters until 73 | RMDs start at 73 (75 if born 1960+) | Use lower-tax years from 68 to 72 |
| Plan withholding covers my tax | 20% withheld on one-off plan payouts | Ask for $25K to net $20K |
| My will covers my IRA | Beneficiary form overrides the will | Update forms after a spouse dies |
Should Astrid spend $20K, $12K or nothing extra on travel this year?
Astrid should spend $12K from bonds this year and postpone $8K when her portfolio is $570K, below its $650K starting value. That choice avoids selling $25K of January-value stock shares and leaves more room for travel next year if the account recovers, while recognizing that recovery may not come on schedule.
Option A, taking $20K from the stock fund, sells $25K of January-value shares. Option B, taking the full $20K from bonds, avoids a stock sale but reduces the bond cushion and raises stocks as a share of what remains. Option C, $12K from bonds now and $8K next year, is the guardrail choice because it leaves a larger cushion for Astrid’s 80s. Quick test: when your statement shows the stock side below its January 1 value, take that month’s withdrawal and extra spending from bonds or cash, and hold any spending raise until the total portfolio is back above its starting value.
Another mistake is lifting spending because of a single strong year. A 15 percent gain on $650K can make an extra $20K of travel feel affordable, but one year’s gain can reverse. Tolleson Wealth Management raises spending only at the annual meeting, and only if the portfolio is still above its starting value. Astrid chooses Option C because her state pension is small. Darnell and Fatima, hypothetical ages 62 and 60, still have Fatima’s part-time bookkeeping paycheck. They can pause portfolio draws in a down month and keep their trip, because her earnings cover that month’s bills.
Bring your paperwork to Tolleson Wealth Management
Talk with Tolleson Wealth Management before a one-off withdrawal larger than a month’s draw, or after a quarterly statement shows a meaningful drop. Bring the latest 403(b) and IRA statements, last year’s 1099-R, every beneficiary confirmation, and the pension benefit letter. Before any account moves, the firm sets out in writing how it is paid. It requires $500K in investable assets to open a relationship.
Questions about retirement withdrawal mistakes to avoid
If I take $20K out of my 403(b) for a trip and my plans change, can I put the money back?
Is it better to take travel money as one lump sum or spread it across my monthly withdrawals?
Where the rules come from
This is general information, not personalized investment, tax, or legal advice. Investing involves risk, including possible loss of principal. Talk to a financial professional before making decisions about your money.