Most retirement planning focuses on how much you have saved. Just as important is the order in which you spend it. Different accounts are taxed differently, and the sequence of withdrawals can change how much of your money you actually keep.
Know what you're holding
Broadly, savings fall into three groups: money already taxed (ordinary savings and investment accounts), money not yet taxed (most pensions and retirement funds, taxed when you draw it), and tax-free or tax-advantaged accounts. The rules differ by country, but that three-way split is nearly universal.
Use allowances before they expire
Most tax systems give each person annual allowances — a band of income taxed at nothing or very little, and an amount of investment gains you can realise each year without tax. Allowances generally can't be carried forward. Drawing enough each year to use them, even if you don't need the cash, can be more efficient than leaving them unused.
Watch the cliff edges
Tax isn't always a smooth slope. Crossing a threshold can raise the rate on the next slice of income, reduce a means-tested benefit or add a surcharge. Planning withdrawals to stay under those points, and spreading a large withdrawal across two tax years, can avoid an expensive jump.
Think about who inherits
Accounts are also treated differently on death. In some countries, spending taxable savings first and leaving pension money invested passes more to your family; in others the reverse is true. This is worth checking with your accountant, since the rules change.
