A withdrawal appears whenever a year’s outflows exceed its cash inflows, or when something is set to be paid straight from an account. Outflows include taxes, payroll contributions, loan payments, property costs and health coverage as well as your expenses, so a year can draw on savings while you’re still working.
Start with the year’s cash flow: select the year on Overview and compare Income, Taxes and Spending with Net cash flow. A negative net cash flow is covered by withdrawals in your drawdown order.
Spending plus taxes is more than take-home pay
Tax on the year’s income is settled in the same year, so withholding you enter changes timing, not the total. If Spending plus Taxes exceeds Income, the difference is withdrawn, starting with the first account in your order. When that account is checking or savings, the “withdrawal” is simply cash you saved earlier being spent.
A one-time or recurring expense lands in that year
Expenses tied to a milestone, a start or end month, or a recurrence every few years can push a single year negative. So can a loan paid off at a milestone, which pays the remaining balance that year.
An expense is paid from a specific account
An expense with Fund from a specific account set is withdrawn from those accounts every year it’s active, even in a year with a surplus. See How shortfalls are funded.
Payroll contributions leave too little pay
401(k) deferrals and payroll HSA contributions come out of pay before spending. If what’s left doesn’t cover spending, the gap is withdrawn, which in effect funds the contributions from savings. Savings rules that use surplus never cause a withdrawal; they fund only what is left over.
A tax bill from a conversion, gain harvest or withdrawal
Roth conversions and gain harvesting add taxable income without adding cash, so their tax is paid from the year’s cash flow. Withdrawals from traditional accounts and brokerage gains add tax too, which is paid by withdrawing a little more. Early withdrawals also carry the additional tax described in Early withdrawal penalties and Roth ordering.
Marketplace credit is repaid at reconciliation
When Marketplace coverage is on, the advance premium credit is based on an estimate of income. If the year’s final income is higher, including income from the withdrawals themselves, part of the credit is repaid with that year’s tax, and the repayment is withdrawn too. See Marketplace coverage and premium tax credits.
Gifts and distributions paid from an account
Charitable gifts and qualified charitable distributions funded from an account are listed with the year’s withdrawals. Required distributions and 72(t) payments are counted as income, not withdrawals, but their tax is still due; see Required minimum distributions and 72(t) SEPP distributions.
An earlier shortfall is being repaid
If a past year couldn’t be fully funded, later years withdraw to pay that amount back once they have cash or balances to cover it. See When a plan runs short.