Tax-Efficient Withdrawal Strategies for Ohio Retirees

Two couples retire in Centerville the same year. Same house value, same $900,000 saved, same spending. Twenty-five years later one has paid roughly $180,000 more in federal taxes than the other.

They did not earn different returns. They took money out in a different order.

Withdrawal sequencing is one of the few parts of retirement you fully control. You cannot control the market or what Congress does with tax rates. You can control which account you tap in January.

Your Three Buckets of Money

Nearly every retiree we sit down with in Beavercreek has some mix of three types of accounts, and the IRS treats each one very differently.

Taxable accounts

Brokerage accounts, savings, CDs, inherited stock. You already paid tax on the money going in. When you sell, you owe tax only on the gain — and long-term capital gains get preferential rates. For a married couple filing jointly in 2026, long-term gains are taxed at zero percent as long as total taxable income stays at or under $98,900 (IRS Rev. Proc. 2025-32). That zero-percent bracket is one of the most underused tools in retirement.

Tax-deferred accounts

Traditional 401(k)s, traditional IRAs, 403(b)s, the TSP for our Wright-Patterson retirees. Every dollar out is ordinary income, taxed at your regular rate. These are the accounts that eventually force your hand through required minimum distributions.

Tax-free accounts

Roth IRAs, Roth 401(k)s, and HSAs used for medical costs. No tax on qualified withdrawals, no RMDs on Roth IRAs during your lifetime, and they pass to your kids more cleanly than anything else you own. These are your most valuable dollars. Spend them last.

Why the Old Rule Falls Short

The conventional advice says: drain taxable first, then tax-deferred, then Roth. Let the tax-sheltered accounts grow as long as possible.

It is not wrong, exactly. But it creates a problem that shows up about a decade in.

If you spend the 2010s living entirely off your brokerage account, your traditional IRA keeps compounding untouched. At 73, RMDs begin. Now you have a $1.2 million IRA throwing off a mandatory distribution of nearly $45,000 a year on top of Social Security. You are suddenly in a higher bracket than you were while working, your Medicare premiums jump, and more of your Social Security becomes taxable.

Retirees describe this as a tax bomb, and it is largely self-inflicted — the result of a strategy that optimized each year in isolation instead of looking at the whole span of retirement.

Filling Up Tax Brackets on Purpose

The better approach is to stop asking “which account do I empty first” and start asking “how much ordinary income should I generate this year.”

Federal brackets are progressive. In 2026, a married couple filing jointly pays 10 percent on the first slice, 12 percent on the next, then 22 percent, then 24. The 12 percent bracket runs up to $100,800 of taxable income — the 22 percent bracket starts above that (IRS 2026 inflation adjustments).

Because taxable income is what is left after deductions, gross income can be quite a bit higher. A couple who are both 65 or older start with the $32,200 standard deduction, add $1,650 each for being over 65, and — for tax years 2025 through 2028 — may add the new $6,000-per-person senior deduction — $12,000 for a couple where both qualify — which phases out above $150,000 of modified AGI for joint filers (IRS guidance for seniors). Stack those up and a couple can have meaningfully more than $100,800 in gross income with their last dollar still taxed at 12 percent. The exact figure depends on which deductions you qualify for, so work it out with your preparer rather than assuming a round number.

If your normal spending only requires $70,000, you are leaving a large chunk of cheap bracket space unused every year. That space does not carry forward. It disappears on December 31.

So you fill it deliberately — by taking IRA withdrawals you do not immediately need, or by converting IRA money to a Roth. Pay 12 percent now on money that would otherwise be taxed at 22 or 24 percent later, when RMDs and Social Security stack up.

The Gap Years Are Your Best Years

The window between retiring and starting Social Security — often 62 to 70 — is the most valuable tax planning period most people will ever have. Your income is at a lifetime low. No paycheck, no Social Security yet, no RMDs.

A Kettering couple who retires at 64 and delays Social Security to 70 has six years of nearly empty tax brackets. Live off the brokerage account for cash flow, and convert $60,000 to $80,000 a year from the traditional IRA to a Roth at 12 percent. Over six years that moves $400,000-plus into a tax-free account.

What that buys you: much smaller RMDs at 73, lower lifetime Medicare premiums, less of your Social Security taxed, and a pot of Roth money your kids can inherit without a tax bill.

Two cautions. Conversions must be paid from outside the IRA — use taxable money for the tax bill or you defeat the purpose. And if you are on an ACA marketplace plan before 65, a conversion raises the income that determines your premium subsidy. Sometimes it still wins. Sometimes it does not. Run it before you do it.

Two Cliffs to Watch: IRMAA and Social Security

Two features of the tax code behave like cliffs rather than slopes, and both can turn a smart-looking conversion into an expensive one.

IRMAA

Medicare Part B and Part D premiums rise once income crosses certain thresholds, based on your tax return from two years earlier. In 2026 the first threshold is $109,000 for a single filer and $218,000 for a married couple filing jointly, measured against 2024 income. Cross it by one dollar and the surcharge applies to the whole year — Part B jumps from $202.90 a month to $284.10, and Part D adds $14.50 a month on top of your plan premium. That is roughly $1,150 more per person for the year, about $2,300 for a couple, at the very first tier (CMS 2026 Medicare Costs). There is no phase-in.

For a couple doing modest conversions inside the 12 percent bracket, IRMAA usually is not the binding constraint — $218,000 is a long way up. It becomes the live issue for higher-income households, for anyone doing large conversions, and for people with a one-time income event like selling a rental property or a business. Once you are 63 or older, those larger moves should be checked against the next IRMAA threshold. Stopping a conversion just short of the line is often the right call.

The Social Security tax torpedo

How much of your Social Security is taxable depends on your other income. As you add IRA withdrawals, more of your benefit becomes taxable — up to 85 percent. In a certain income band, each extra $1,000 withdrawn also makes $850 of Social Security taxable, producing an effective marginal rate of 22 percent while you appear to be in the 12 percent bracket.

This is the strongest argument for doing conversions before Social Security starts. Once benefits begin, cheap-looking withdrawals often are not.

How Ohio Taxes Retirement Income

Some good news for Miami Valley retirees.

Ohio does not tax Social Security benefits at all. As of 2026 the state moved to a flat 2.75 percent income tax on nonbusiness income, with income below roughly $27,350 taxed at zero. Ohio also offers a modest retirement income credit for qualifying retirement plan distributions and a small senior citizen credit for residents 65 and older — both are worth a few hundred dollars at most, but they are easy to miss. Between the low flat rate and the Social Security exemption, Ohio is a comparatively friendly place to draw down a retirement account.

Watch local income taxes, though. Municipalities around Dayton generally do not tax pensions or retirement distributions, but rules vary by city, so confirm with your municipality or your tax preparer rather than assuming.

One more Ohio-specific item: qualified charitable distributions. Once you are 70½, you can send roughly $111,000 a year directly from an IRA to a charity — and a couple with separate IRAs can each do so. This cap is indexed for inflation every year, so confirm the current figure with your custodian or preparer before writing a large gift. It counts toward your RMD, never appears in your income, and therefore does not push you toward an IRMAA threshold or make more Social Security taxable. For folks already giving to a church or a Dayton-area nonprofit, this is almost always better than writing a check from checking.

A Dayton Couple’s Example

Consider a Beavercreek couple, both 65, retiring with $700,000 in a traditional IRA, $250,000 in a brokerage account, and $150,000 in a Roth. They need $75,000 a year and plan to claim Social Security at 70.

The default path: spend the brokerage account for five years, start Social Security, begin RMDs at 73. By 75 their IRA has grown past $900,000, RMDs run roughly $37,000, and combined income lands near $115,000 — pushing them into the 22 percent bracket and making up to 85 percent of their Social Security taxable. (At that income they are still well below the $218,000 IRMAA threshold; IRMAA becomes the concern for couples with larger balances or a one-time income event.) These figures are an illustration, not a projection — your own numbers will differ.

The planned path: from 65 to 70, cover the $75,000 with a mix of brokerage withdrawals and IRA distributions, then convert an additional $50,000 a year to the Roth — staying inside the 12 percent bracket. Five years of that moves roughly $250,000 into tax-free space.

At 73 their RMDs are meaningfully smaller, less of their Social Security is taxable, and they hold a Roth balance they can draw on in any year a big expense — a new roof, a long-term care need — would otherwise spike their income.

The money did not change. The order did.

Where to Start

You do not need a spreadsheet with fifty tabs. You need three numbers: what you have in each of the three buckets, what you actually spend in a year, and where the top of your current tax bracket sits.

From there the question each year is simply how much room is left before the next bracket or the next IRMAA threshold — and whether it makes sense to fill it.

This is the kind of planning that quietly pays for itself many times over, and it is easier to get right early than to fix at 73. Medicare & Retirement Solutions Group is in Beavercreek, and we help retirees across Dayton and the Miami Valley map out withdrawal and conversion strategies alongside their Medicare decisions — because the two are more connected than most people realize.

A conversation costs nothing. Call us or reach out through medretiregroup.com, and we will look at your buckets, your brackets, and what this year’s opportunity actually looks like.

This article is general information, not tax advice. Please review your specific situation with a qualified tax professional.