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How to Optimize Taxes When You Tap Your Retirement Accounts

Typically, the conventional wisdom suggests a sequential approach to account withdrawal post-retirement, starting with taxable accounts, moving on to tax-deferred accounts like 401(k)s and IRAs and finally dipping into tax-free accounts such as Roth IRAs. This strategy is primarily designed to allow your retirement funds to grow tax-deferred for as long as possible, thus maximizing the overall value of your nest egg.

However, while this approach may seem logical and practical at first glance, it may not always be the most beneficial when optimizing your tax efficiency in the long term. Depending on your financial circumstance, a different approach could potentially save you thousands of dollars in taxes, thereby extending the longevity of your retirement savings.

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