On this page
- The default order and how to change it
- What each withdrawal costs in tax
- Worked example: an $80,000 year with no income
- Filling a tax target before following the order
- Protecting a cash reserve
- Expenses paid from specific accounts
- Accounts you can’t withdraw from yet
- When the accounts run out
- What isn’t modeled
When a year’s income doesn’t cover its spending, taxes, loan payments and other outflows, CoastMath withdraws the difference from the accounts in your drawdown order, top to bottom, emptying each account before it moves to the next. Accounts that aren’t in the order are never used to cover a shortfall.
Each withdrawal is sized so that what remains after any additional tax on it covers the gap. The income tax the withdrawals create is settled in the same year, by withdrawing more from the same order until the tax is paid.
You don’t have to set an order. Each account you add is placed into it by type, ahead of the first account whose type comes later in this list, so an order you’ve rearranged keeps its shape:
| Position | Account types |
|---|---|
| 1 | Checking, Savings |
| 2 | Taxable Brokerage |
| 3 | Traditional 401(k), Traditional IRA |
| 4 | Roth 401(k), Roth IRA |
| 5 | HSA |
| 6 | Other |
| Not added | 529 Plan |
Accounts of the same type keep the order in which you added them.
If your plan has no checking, savings or brokerage account, surplus from earlier years is held as generated cash. That cash is always spent first, ahead of your saved order.
| Account type | Taxed as |
|---|---|
| Checking, Savings | Nothing |
| Taxable Brokerage | The gain share of the sale, at long-term capital gains rates |
| Traditional 401(k), Traditional IRA | Ordinary income, plus a 10% additional tax on the part of the year before the owner reaches 59½ |
| Roth 401(k), Roth IRA | Contributions first, then conversions, then earnings; only unqualified earnings are income |
| HSA | Untaxed up to the year’s modeled medical costs; the rest is ordinary income, plus 20% before 65 |
| 529 Plan | Untaxed up to the year’s qualified education expenses; beyond them, the earnings share is ordinary income plus 10% |
| Other | Nothing |
A brokerage sale realizes gain in proportion to the account’s unrealized gain, using average cost. All gains are treated as long-term.
Realized gain=Amount sold×(1 − cost basis ÷ balance)
When a withdrawal carries an additional tax, it is grossed up so the amount left after that tax covers the gap. Income tax isn’t part of this gross-up; it is settled once the year’s income is known.
Withdrawal=Amount needed÷(1 − additional-tax rate)
The additional-tax rate is 10% for a traditional account before 59½, prorated when you reach 59½ during the year. Roth withdrawals are sized against their own ordering.
Once the withdrawals are made, CoastMath recalculates the year’s tax on the final income. If the withdrawals raised it, the extra tax is funded by withdrawing more from the same order, which is recalculated again until the tax is paid. If they lowered it, the refund is saved by your savings rules.
A single 62-year-old in 2026 spends $80,000 and has no income. The order is Checking ($10,000), Brokerage ($50,000, cost basis $30,000), Traditional IRA ($400,000), Roth IRA. No growth is assumed, so the arithmetic is visible.
The brokerage sale realizes a $20,000 gain, taxed at 0% because taxable income stays within the 0% capital gains bracket. The IRA withdrawal pays its own income tax.
Show data
| Step | Amount |
|---|---|
| Checking | $10,000 |
| Brokerage | $50,000 |
| Traditional IRA | $20,433 |
| Income tax | −$433 |
| Spending covered | $80,000 |
| Still needed after cash and brokerage | $20,000 | |
|---|---|---|
| Traditional IRA withdrawal | $20,433.33 | |
| − | Standard deductionSingle filer, 2026 | $16,100 |
| = | Taxable ordinary income | $4,333.33 |
| × | Rate in the 10% bracket | 10% |
| = | Income tax paid from the withdrawal | $433.33 |
$20,433.33 − $433.33 = $20,000. At 57 the same year needs $22,987.50 from the IRA: $2,298.75 of additional tax and $688.75 of income tax.
With a tax target set and Fill the tax target first turned on, a year that needs withdrawals takes them in two passes. The first pass walks your order but only uses accounts whose withdrawals create taxable income: traditional accounts, where every dollar is ordinary income, and brokerage accounts with an unrealized gain, where the gain share of each sale counts. It takes from each only as much as keeps the year’s income within the target, measured on the final tax picture, so the extra taxable Social Security or lost deductions a withdrawal causes count too. The second pass funds whatever is still needed from your order exactly as above.
Cash, Roth and HSA accounts, accounts that are locked, and accounts whose withdrawals would carry the early-withdrawal penalty that year are skipped in the first pass. The tax the withdrawals create is settled afterwards by the order, as usual.
| Traditional IRA, first pass | $66,500 | |
|---|---|---|
| − | Standard deductionSingle filer, 2026 | $16,100 |
| = | Taxable income: the top of the 12% bracket | $50,400 |
| Brokerage, second pass: rest of spending | $13,500 | |
| + | Brokerage: federal income tax | $5,800 |
| = | Brokerage withdrawals | $19,300 |
A single 62-year-old with no income, a brokerage account with no unrealized gain first in the order and a traditional IRA second. Without the target the whole year comes from the brokerage account and no tax is due; with it, $66,500 of the IRA is spent at 10% and 12% instead of waiting for later, larger required distributions.
The target can be a federal bracket, a taxable income or MAGI amount in today’s dollars, a Medicare IRMAA tier, or a share of the poverty line in years with Marketplace coverage. Extra ceilings for the net investment income tax threshold, the first IRMAA tier and a poverty-line share in coverage years each also apply when checked; the tightest one sets the year’s room. The IRMAA ceilings use the ranges projected for two years later, the premium year that income sets, and apply once someone reaches 65 by then. Bracket and taxable income targets count capital gains and qualified dividends, so a brokerage sale’s gain uses the same room as IRA income.
Roth conversion and gain harvest rules can share the same target; see Roth conversions. Harvests run before the withdrawals and conversions after them, so each uses the room the earlier ones left.
By default, checking and savings are spent in whatever place they hold in the order. If you want an emergency fund kept for last, turn on a cash reserve. Choose the checking or savings accounts that hold it and the amount to protect, in today’s dollars. The amount rises with inflation and cannot exceed what those accounts actually hold.
With a reserve on, the normal order skips the protected part of those accounts. Balances above the reserve are spent as usual. Only when every other account in the order is empty, locked or otherwise unavailable does CoastMath spend the reserve, in the order you list the reserve accounts. Required distributions, specific funding sources and locks work as before, and a locked reserve account stays locked.
| Checking above the reserve$30,000 balance less the $20,000 reserve | $10,000 | |
|---|---|---|
| + | Brokerage, no unrealized gain | $50,000 |
| + | Reserve, last resortHalf of the protected $20,000 | $10,000 |
| = | Shortfall covered | $70,000 |
Checking first in the order, then brokerage. No other accounts, no growth and no tax on the sale.
With Invest cash above the reserve each year also checked, CoastMath moves cash the reserve accounts hold above the reserve into your allocation rules at the end of each year, after spending and other rules are funded. The cash fills contribution rules in their order, up to what each still lacks for the year: its annual maximum, fixed amount and contribution limits. Percentage rules, debt payment rules and rules that pay into a reserve account don’t take part. Locked reserve accounts aren’t drawn. Moving the cash isn’t taxed; a deductible contribution it funds is deducted like any other, and the moves appear as transfers.
An expense can name the accounts that pay it. That expense is then withdrawn from those accounts every year it’s active, whether or not income that year would have covered it, and it is left out of the general shortfall. Tax treatment is the same as for any withdrawal from that account, except that HSA money spent this way is treated as a qualified medical expense.
When you select several accounts, CoastMath uses them by account type, in the order those types first appear in your drawdown order, and within a type in the order you listed them. Types that aren’t in your drawdown order follow checking, savings, brokerage, HSA, traditional IRA, traditional 401(k), Roth IRA, Roth 401(k), 529 and other.
Some money can’t be touched until later: deferred compensation paid only after you leave your employer, a workplace plan with no in-service withdrawals, a trust or lump sum available at a set age, or a CD that matures in a given year. Set Withdrawals available on the account to keep the projection from spending it early.
| Available | First year withdrawals are allowed |
|---|---|
| From age | The year the owner is at or past that age for more than half the year, the same rule used for 59½. A partner’s account uses the partner’s age; a joint account uses yours. |
| From milestone | The year the milestone is reached |
| From year | January of that year |
Born in January to July, a lock at 62 opens the year you turn 62; born in August to December, it opens the year after. Without a birth month, July is assumed.
While an account is locked, it is skipped in the drawdown order and can’t pay an expense assigned to it, a transfer, a Roth conversion, a gain harvest, a 72(t) payment, a charitable gift or a qualified charitable distribution beyond its required distribution. Contributions and growth continue as usual. From the year it opens, it behaves exactly like any other account.
A locked balance counts toward net worth but isn’t liquid. If the other accounts run out first, the gap is unfunded exactly as described below, and it is repaid once the account opens. In Monte Carlo, a trial fails under the liquid-assets test when the accounts you can withdraw from reach zero, even if a locked account still holds money. Financial independence milestones measured on liquid net worth also leave locked balances out.
Household accounts are shared by your plans, but milestones belong to one plan. In a plan that doesn’t have the lock’s milestone, the account is available any time and the projection shows a warning. A milestone used by a lock can’t be deleted until you change the lock.
If every account in the order is empty and a gap remains, the remainder is recorded as unfunded and the plan fails in that year. Property marked Auto-liquidate on depletion is sold first, into its liquidation target account, before a gap is left unfunded.
An unfunded amount from general cash flow carries forward as a debt that reduces net worth. Each later year tries to repay it from the drawdown order; the plan’s first failure year still stands. See When a plan runs short.