When expenses exceed income in any year, the shortfall is covered by withdrawing from your accounts in the following order:

1. HSA covers healthcare first (default) - if you have Healthcare (out-of-pocket) expenses and an HSA account with a balance, those expenses are drawn from the HSA before anything else. This is separate from the general withdrawal order below. Each HSA account also has a Delay withdrawals (maximize growth) strategy: when that's selected, the HSA is not drawn for healthcare, those expenses go through the general withdrawal order instead, and the unreimbursed amount is tracked as future tax-free withdrawal capacity you can claim later.
2. Taxable investment accounts - withdrawals here are subject to capital gains tax rather than ordinary income tax, which is typically lower. Drawing from taxable accounts first also allows tax-advantaged accounts to continue compounding.
3. Tax-deferred accounts next (traditional IRA, 401(k), etc.) - withdrawals are taxed as ordinary income. Required Minimum Distributions (RMDs) are always taken from these accounts at the applicable age regardless of sequencing.
4. Tax-free accounts (Roth IRA, Roth 401(k)) - withdrawals are tax-free. Preserving these accounts as long as possible maximizes their tax-free growth and provides flexibility in later years.
5. Cash accounts last - drawn only after all investment accounts are exhausted.
6. HSA non-qualified at age 65+ (final last resort, Delay mode only) - if a Delay-mode HSA still has a balance and every other account (including cash) has been drained, the engine taps the HSA from age 65 onward. Non-qualified withdrawals after 65 are penalty-free per IRC §223 but taxed as ordinary income; the engine grosses up the draw at your marginal rate and books it like a Traditional IRA distribution. Before 65 the HSA stays off-limits for general spending because the 20% federal penalty would apply.

Cash reserve target: If you set a reserve target on a cash account, the planner changes the order slightly - cash above the target is drawn before investment accounts, keeping the protected reserve untouched. Cash below the target is only used as a last resort after all other accounts are exhausted. If a year's surplus income would otherwise be invested but cash has been drawn below the target, the planner refills cash up to the target first and routes the remainder to taxable investment - the same way you'd top up an emergency fund before adding to your brokerage account. You can set a reserve target on any cash account under the Accounts tab.

Draw Priority (per-account): Within each bucket above, each account has a Draw Priority that fine-tunes the order. Normal accounts are drawn first within their bucket, Deferred accounts are held back until all Normal accounts in that bucket are exhausted, and Last resort accounts are only used after Deferred ones are gone. Legacy / Do not spend excludes the account from discretionary withdrawals entirely - it's preserved for inheritance even if the plan would otherwise fail. Required distributions still apply to a Legacy Tax-deferred account because RMDs are legally required, and the account continues to grow with market returns; the engine just won't tap it to cover spending. You set Draw Priority on each account in the Accounts editor.

Withdrawal shielding (plan-wide): By default the engine draws whatever a year needs from the tax-deferred bucket before it touches tax-free. Withdrawal shielding puts a ceiling on that step: pick a tax bracket, and once your ordinary income reaches the top of it the tax-deferred draw stops and the rest of the year's need comes from tax-free instead. The order itself does not change - taxable is still spent first, then tax-deferred, then tax-free - the tax-deferred step just stops early. Two limits apply: it only takes effect from age 60 on, so redirecting to a Roth cannot run into the 10% early-withdrawal penalty on earnings, and it does nothing unless there is a tax-free balance left to cover the remainder, because capping with no fallback would simply underfund the year. Required minimum distributions are forced by law, so they still count against the ceiling and cannot be shielded. Treat it as a trade rather than a free win: you pay less tax in the years it bites, but you spend tax-free money faster, so compare ending balances as well as the tax bill. Off by default; you set it on the Accounts page under Withdrawal strategy.

Cost basis for Taxable withdrawals: If you enter an explicit cost basis on a Taxable account, the planner uses it to compute the realized-gain portion of every withdrawal. If you leave cost basis blank, the planner falls back to assuming 50% of the current value is cost basis. Entering an accurate cost basis is worthwhile for plans with large Taxable balances or where you expect a one-time liquidation - the default fallback can over- or under-state capital-gains tax depending on how long you've held the account.