Withdrawal location with progressive tax rates

Optimal withdrawal strategies are developed for retirees with multiple types of tax-advantaged savings accounts. In an environment of progressive tax rates, the ability to convert pretax funds in traditional IRAs at low tax rates substantially increases investors' residual accumulations and withdrawal sustainability. Specifically, informed withdrawal-location strategies, in which traditional IRA distributions can be applied against exemptions, deductions, and lightly taxed tax brackets, can increase residual accumulations by more than $1 million. In these strategies, the optimal tax bracket through which an investor should take distributions is directly related to the investor's wealth level.