At some point in retirement, most of us will start to withdraw assets from our investment accounts.  Generally we'll start with our taxable accounts, then IRA funds and finally our Roth IRA.   IRA accounts are tapped last in order to take advantage of tax deferral and Roth accounts don't have the mandatory 701/2 rule.  However, this approach may have substantial tax costs.

Humberto Cruz explains we may want to do a "mixture" of withdrawals from our IRA accounts and our Roth IRA accounts to try to minimize taxes on our Social Security.  Remember your Social Security will be taxable if your income is above $25,000 for an individual and $32,000 for a couple filing jointly.

In one scenario in the report, for example, a middle class couple retiring at age 65 reduced their annual tax bill from $5,346 to a mere $260 by mixing withdrawals from both the husband's deductible rollover IRA and the wife's tax-exempt Roth IRA, rather than taking them all from the rollover IRA. The reason: Roth IRA withdrawals do not count as income when determining how much of Social Security benefits are taxable, but withdrawals from traditional IRAs do.