401(k), Social Security or pension first? The 2026 withdrawal order that can make or break you

Most retirees rely heavily on Social Security. A 2024 survey by The Senior Citizens League found that 67% of seniors get more than half of their total income from Social Security. About one-third of seniors also have money from 401(k) plans or traditional pensions. These people need to plan carefully to pay less tax.

If you don’t plan how to use your different income sources, you could pay too much tax and even run out of money. The first step is to be clear about what is important to you in retirement. Some retirees want to leave money for their family or create a financial legacy. A 2023 report by the TransAmerica Center for Retirement Studies says 20% of retirees have this as a top goal, as reported by Moneywise.

What matters most in retirement

If leaving money is your goal, you may take less money early and save more for the future. Other retirees want to enjoy life while they are still young and healthy, like traveling or doing hobbies. According to TransAmerica, 35% of retirees worry about health care and long-term care, and 32% worry about outliving their savings.


Once you know your priorities, you should work with a financial advisor to plan how to take money from Social Security, 401(k), IRAs, and pensions. Only 14% of private workers have a traditional pension, according to the Bureau of Labor Statistics. Older workers and government employees are more likely to have pensions, as stated by Moneywise. Pensions give guaranteed income, but if you don’t plan well, they can create big tax bills.

Use smart withdrawal strategies to save taxes

If your goal is to enjoy early retirement, you might use your 401(k) first. This can lower required minimum distributions (RMDs) later and reduce future taxes. Delaying Social Security allows you to convert 401(k) or IRA funds into Roth IRAs, which can save money on taxes later. If your goal is to leave money for your family, taking your pension early may put you in a lower tax bracket. This helps you keep money invested longer and grow it for heirs.

There is no one-size-fits-all answer for which income to take first. It depends on your goals, lifestyle, and tax situation. Making decisions without looking at all your income sources together can increase taxes and reduce your total money in retirement, as noted in the report by Moneywise.The key is to treat all your retirement income sources as part of one plan and take money in a smart order to save taxes and enjoy life.

FAQs

Q1. Which retirement income should I use first, 401(k), pension, or Social Security?

It depends on your goals, taxes, and lifestyle—plan withdrawals carefully to save taxes and enjoy retirement.

Q2. How can I reduce taxes on my retirement income?

Sequence withdrawals from 401(k), pension, and Social Security wisely and consider Roth conversions to lower taxes.