Most retirees follow a simple playbook when it comes to taking withdrawals from their IRAs: take out the same amount each year. It feels predictable and safe. But what if there were a smarter way—one that doesn’t reduce your income, but reduces your taxes?
Under the right circumstances, alternating between higher and lower annual IRA distributions—instead of taking a steady amount each year—can lead to meaningful tax savings over time. And the surprising part? Your total income stays the same.
Let’s walk through a real-world example and explore how (and when) this strategy works.
The Example: Equal vs. Alternating IRA Withdrawals
We compared two strategies for a retired couple filing jointly:
- Equal Withdrawal Strategy: Withdraw $60,000 per year from an IRA
- Alternating Strategy: Withdraw $80,000 in Year 1, and $40,000 in Year 2
(In the low-withdrawal year, the couple covers expenses using savings from the previous year’s surplus.)
Key Assumptions:
- Filing Status: Married Filing Jointly
- Social Security Benefits: $60,000 per year (combined for both spouses)
- IRA Distributions: Either steady or alternating
- No other income sources
- All IRA distributions are fully taxable
- In the example we are using the 2025 tax schedule
The Tax Results (Two-Year Totals)
| Strategy | IRA Distributions (Y1 / Y2) | Federal Tax (Y1) | Federal Tax (Y2) | 2-Year Total |
|---|---|---|---|---|
| Equal Withdrawals | $60K / $60K | $8,151 | $8,151 | $16,302 |
| Alternating Strategy | $80K / $40K | $11,344 | $3,711 | $15,055 |
| Tax Savings | — | — | — | $1,247  |
Despite having the exact same total income over two years ($120,000 from IRA + $120,000 from Social Security), the alternating strategy results in $1,247 less in federal income taxes—a nearly 8% reduction.
Why the Savings Happen
Federal taxes are not only progressive—they’re full of thresholds and cliffs where small changes in income can have outsized effects on your tax bill.
Here’s why alternating works in this case:
- In the high-distribution year, the couple pays more tax, but the increase is moderate.
- In the low-distribution year, less of their Social Security is taxed, and their overall income falls into a lower bracket—resulting in tax savings that are larger than the extra taxes during the high-income year.
- Year 1 (high distribution) takes advantage of room in the 12% bracket
- Year 2 (low distribution) drops income enough that a significant portion of Social Security becomes untaxed
- You avoid triggering:
- IRMAA (Medicare surcharge thresholds at $194K for joint filers)
- 22% federal tax bracket (~$94K taxable income for married filing jointly since we can use teh standard deduction)
- Net Investment Income Tax (starts at $250K, irrelevant here)
Overall, the two-year total is lower than if the same amount was withdrawn evenly across both years.
The 24-Month Withdrawal Plan
To make this strategy practical and sustainable, it helps to structure monthly withdrawals carefully. Here’s one way to do it that supports cash flow and tax efficiency:
Monthly IRA Withdrawal Schedule
- Year 1 IRA Total: $55K (Months 1–11) + $25K (Month 12) = $80,000
- Year 2 IRA Total: $0 (Months 13–16) + $5K × 8 = $40,000
The extra $20K distributed in Month 12 (compared to equal monthly withdrawals) is saved and used to fund expenses for the first four months of Year 2, when no IRA distributions are taken.
This schedule helps shield Social Security from taxation in Year 2 and improves behavioral outcomes by minimizing the time that surplus funds are sitting in a checking or savings account.
| Year / Month | IRA Withdrawal | Notes |
|---|---|---|
| Year 1 Months 1 – 11 | $5,000 | Regular monthly withdrawals |
| Year 1 Month 12 | $25,000 | Includes $5K for Month 12 + $20K saved for next year |
| Year 2 Months 1 – 4 | $0 | Funded by $20K saved from Month 12 in year 1 |
| Year 2 Months 5 – 12 | $5,000 | Resume regular monthly withdrawals |
When This Strategy Doesn’t Work
This approach isn’t a magic bullet. It only works under specific conditions and can actually result in higher taxes if misapplied. A useful tool to estimate how this could work for you is our tax estimator.
It’s unlikely to work if:
- The “low” year is still too high:
If your income is high enough to make most of your Social Security taxable regardless of IRA withdrawals, you won’t benefit from this strategy. This could for example be the case if your required minimum distributions are too high. However, that is in general a good problem to have, that means you have done well in growing your retirement accounts. - The “high” year pushes you into steep brackets:
If your large distribution year hits the 24% tax bracket or triggers things like the Net Investment Income Tax or IRMAA surcharges, the tax penalty might outweigh the savings. State taxes could also impact the efficiency of this strategy. - You don’t stick to the plan:
This strategy assumes you save part of the high-year distribution to fund the low-distribution year. It doesn’t require prior savings, but it does require discipline. Spending that early distribution ahead of plan undermines the entire approach. - You’re already in a low or zero-tax bracket:
If little or none of your Social Security is taxed and your withdrawals are relatively small, alternating won’t help—and may actually hurt.
Important Planning Notes
To get the most out of this strategy—and to make it easier to follow—timing matters.
- Take the larger IRA distribution late in Year 1:
This keeps more money growing in your IRA tax-deferred for longer and reduces the chance you’ll spend the surplus before you need it. - In Year 2, spend the saved surplus first:
Use the funds saved from Year 1 before taking your smaller IRA withdrawal. This maximizes tax-free growth and helps reinforce discipline. - Minimize early access to future-year funds:
Structuring the plan this way means you don’t distribute money far in advance of when it’s needed—reducing temptation and maximizing efficiency.
Bottom Line: A Simple Shift, Real Savings
This real-world example shows that simply adjusting the timing of IRA withdrawals—without changing your total income—can save $1,247 in federal taxes over two years.
But this only works when Social Security income, IRA withdrawals, and tax brackets interact just right. For many retirees, it might not help—or could even backfire.
Detailed tax modeling or advice from a qualified tax professional is essential before trying this strategy yourself. But for those with the right income profile, alternating distributions could be a low-risk way to keep more of your retirement income.
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