Which account pays for the first five years of retirement?
TESTBy Daniel Okafor, CFP® · Founder & Lead Planner ·
In the first years of retirement, the account you draw from first should be the one that costs you the least in taxes and preserves the most flexibility later. For many CSU retirees that means spending from taxable savings and using low-income years before Social Security to convert or draw pre-tax balances deliberately, while the PERA benefit covers the fixed monthly bills.
Map the accounts by tax treatment
- PERA benefit: taxable income, paid monthly, adjusted by the plan's rules. Think of it as the floor.
- 403(b) and 401(a): pre-tax; withdrawals are ordinary income and required distributions begin at the age the law sets.
- Roth balances: tax-free withdrawals if the rules are met; the most valuable dollars to leave alone.
- Taxable brokerage and cash: capital-gains treatment; the most flexible.
The window between retirement and Social Security
If you retire at 62 and claim Social Security at 67 or 70, you have a stretch of years with lower taxable income than you will ever have again. That window is where Roth conversions and measured pre-tax withdrawals can be done at lower rates. Spend it carelessly and the required distributions later push you into higher brackets and higher Medicare premiums.
A sequence that often works
- Cover fixed expenses with the PERA benefit.
- Draw discretionary spending from taxable savings.
- Fill the lower tax brackets on purpose with pre-tax withdrawals or conversions.
- Leave Roth balances for late-life expenses or heirs.
This is a framework, not a prescription; the right sequence depends on your tier, your spouse's income, and the size of each balance.
Related reading
How to cover healthcare before 65: /q/how-cover-healthcare-retire-before-65. Our approach to the planning work: /philosophy. The three-minute readiness check: /quiz/retirement-readiness.
Questions we are asked
For most career employees the monthly benefit is the stronger choice; the refund makes sense in a narrow set of cases. It deserves its own meeting.
Generally yes, on the same schedule as other pre-tax plans.
They have their own payout options and deadlines; we include them in the map.
Educational only, not tax advice. Larkspur Wealth Planning is not affiliated with Colorado PERA, CSU, or TIAA.