Any withdrawal plan must consider the tax ramifications, which have a big impact on your net income. Traditional IRAs and 401(k)s are subject to ordinary income tax when funds are withdrawn, whererummy holeyas Roth IRAs permit tax-free withdrawals under specific circumstances. These account types are taxed differently upon withdrawal. Effective financial planning requires an understanding of these tax ramifications. Withdrawing significant amounts from a traditional IRA, for instance, may cause you to enter a higher tax bracket & incur a higher tax liability than you had originally projected.