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RMD Strategies For A Down Market
Falling stock prices present both challenges and opportunities for cash-strapped retirees. By Ben Mattlin
IN THE CURRENT ECONOMIC UNCERTAINTY, RETIREES ARE likely looking for help, counsel and information. Yet one of the things they might not know they need to think about is their required minimum distributions( RMDs).
“ Market volatility doesn’ t change the obligation to take RMDs, but it does influence how retirees should prepare,” says Jeremy Staadeker, a wealth manager at Steward Partners in McLean, Va.
At age 73 and every year thereafter, retirees with pretax retirement accounts, such as traditional IRAs and 401( k) s, must withdraw a percentage of those accounts and pay income taxes on the distributions. The money may come as a relief for those who are cash-strapped, but for many others it can be bad news; it can push them into higher tax brackets, trigger Medicare surcharges and increase the taxable portion of their Social Security benefits.
Fortunately, regulations allow a degree of flexibility. The total RMD amount is determined by dividing the aggregate value of all pretax retirement accounts( also known as qualified accounts) at the end of the previous year by the taxpayer’ s estimated remaining life expectancy, according to IRS tables.
When To Tap
But which IRAs are tapped, and when, is entirely up to the taxpayer. Note that RMDs can generally be taken from any combination of IRAs, while the rules for employer-sponsored retirement accounts such as 401( k) s and 457( b) s are a little different.
RMDs due on workplace plans must be taken separately from each one. Also, participants in workplace plans can usually delay taking RMDs from those accounts( though not from IRAs) until they retire, even if they are over age 73, unless they are a 5 % owner of the business that’ s sponsoring the plan.
“ The choice of what to sell matters,” Staadeker says.“ During times of market turbulence, we typically encourage clients to prioritize selling assets that have held their value better, aligning with the‘ sell high, not low’ principle. … Selling investments that have significantly declined can lock in losses unnecessarily, potentially harming long-term recovery prospects.”
To avoid having to sell assets at depressed prices, advisors like Staadeker typically tell clients to take withdrawals in advance. That way there’ s no surprise bill when RMDs come due at the end of the year.( Taxpayers who just turned 73 have until April 1 of the following year to take their first RMD. The start age increases to 75 in 2033.)
Some clients benefit from taking smaller distributions every month, regardless of economic conditions, to avoid trying to time the ideal moment for taking assets off the table.“ I encourage retirees to establish a‘ replacement paycheck’ from a liquidity sleeve [ that ] should be set aside in high-yield savings accounts or certificates
44 | FINANCIAL ADVISOR MAGAZINE | JUNE 2025 WWW. FA-MAG. COM