RMDs in a Volatile Market: Strategies to Maximize Returns
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Market volatility has a way of testing even the most disciplined investors. For retirees, that pressure is amplified by a simple reality: regardless of what the market is doing, Required Minimum Distributions (RMDs) are not optional. The IRS requires you to withdraw a specific amount from your retirement accounts each year, whether markets are up, down, or somewhere in between.
That creates a difficult tension. When markets decline, the instinct may be to protect your portfolio by holding steady and avoiding withdrawals until the end of the year. At the same time, delaying too long or withdrawing everything at once can expose you to unnecessary risks related to ordinary income tax laws.
Once withdrawals begin, the sequence of returns matters just as much as the returns themselves, especially in relation to contribution plans for an IRA owner. A down market early in retirement does not just create temporary losses; it can reshape how long your portfolio lasts during the distribution period.
The good news is that with the right strategy, you can meet your RMD obligations while minimizing unnecessary damage to your portfolio. It is not about avoiding withdrawals; rather, it is about taking them thoughtfully, and consulting a qualified tax advisor or professional can help ensure that you do this effectively.
The RMD Basics: A Quick 2026 Refresher
RMD rules have evolved in recent years, and it is important to stay current.
As of 2026, most retirees must begin taking RMDs at age 73. This applies to traditional IRAs and most employer-sponsored retirement plans such as 401(k)s and 403(b)s. Roth IRAs remain exempt during the original owner’s lifetime.
Your RMD amount is calculated using your account balance as of December 31 of the previous year, divided by an IRS life expectancy factor. That means your 2026 RMD is based on your December 31, 2025 balance, regardless of what the market does afterward.
If you are taking your first RMD, you have the option to delay it until April 1 of the following year. However, doing so means you will also need to take your second RMD by December 31 of that same year, resulting in two taxable distributions in one calendar year.
Missing an RMD can be costly. The penalty is currently 25% of the amount not withdrawn, though it may be reduced if corrected quickly. In short, this is one deadline you do not want to overlook.
Why Volatile Markets Make RMDs Especially Dangerous
RMDs become particularly challenging in volatile markets because of something known as sequence of return risk.
This risk refers to the timing of investment returns relative to withdrawals. Two retirees with identical average returns can have very different outcomes depending on when those returns occur. If losses happen early in retirement while withdrawals are ongoing, the long-term impact can be significant. Unlike younger investors who can wait for markets to recover, retirees taking RMDs are required to sell assets. Selling during a downturn locks in losses and reduces the amount of capital that can participate in a future recovery.
There is also a lesser-known factor at play: the lag effect. Your RMD is based on the value of your portfolio at the end of the previous year. If markets decline after that point, your required withdrawal does not adjust downward. You may be forced to withdraw a larger percentage of your now-reduced portfolio.
Over time, this combination of forced withdrawals and market volatility can compound. Even moderate withdrawal rates can accelerate portfolio depletion if early returns are negative. The takeaway is not to fear RMDs, but to approach them with intention.
6 Strategies to Protect Your Portfolio During RMD Season
Pull From the Right Account First
In a volatile market, where you withdraw from matters more than how much you withdraw. If your portfolio includes a mix of equities, bonds, and cash, it is often wise to draw from more stable assets when markets are down. This allows your equity investments time to recover rather than locking in losses.
If you have multiple traditional IRAs, you can aggregate your RMD and take it from the account that is least impacted by market declines or holds more conservative assets.
Maintaining a dedicated cash reserve or short-term bond allocation, often called a “buffer bucket,” can be especially valuable. Ideally, this reserve covers one to two years of RMD needs, reducing the likelihood that you will need to sell equities during unfavorable conditions.
Spread It Out: Dollar-Cost Averaging Your RMD
Many retirees take their entire RMD in a single withdrawal. While simple, this approach can increase exposure to poor market timing. A more measured strategy is to spread your withdrawals throughout the year. Monthly or quarterly distributions allow you to average out market fluctuations, reducing the risk of selling a large portion of your portfolio at a market low.
This approach also creates a steady income stream that mirrors a paycheck, which many retirees find helpful for budgeting and peace of mind.
The goal is not to predict the market, but to avoid concentrating risk in a single moment.
Consider Delaying Your First RMD
If you are turning 73 in 2026, you have a one-time option to delay your first RMD until April 1, 2027.
In a volatile market, this may provide additional time for recovery. However, the decision is not purely about market timing. Delaying means you will take two RMDs in 2027, which could increase your taxable income and potentially push you into a higher tax bracket.
There is also no guarantee that markets will improve during the delay period.
This decision should be guided by a careful review of both your tax situation and your overall income plan. For some retirees, delaying makes sense. For others, it creates more complications than benefits.
Use a QCD to Satisfy Your RMD Tax-Free
For retirees who give to charity, a Qualified Charitable Distribution (QCD) can be one of the most efficient ways to satisfy an RMD.
A QCD allows you to transfer funds directly from your IRA to a qualified charity. The amount counts toward your RMD but is not included in your taxable income.
This has several advantages. It reduces your adjusted gross income, which can help preserve deductions, lower tax liability, and potentially keep you below Medicare premium thresholds.
For those who do not need their full RMD for living expenses, this strategy aligns financial efficiency with personal values.
Consider a Roth Conversion Before RMDs Begin
For retirees approaching RMD age, proactive planning can significantly reduce future obligations. A Roth conversion involves moving funds from a traditional IRA into a Roth IRA. While the converted amount is taxable in the year of conversion, it reduces the balance in your traditional IRA, which in turn lowers future RMDs.
Roth IRAs also offer greater flexibility, as they are not subject to RMDs during the original owner’s lifetime.
Market downturns can create an opportunity here. Converting assets when values are lower means paying taxes on a smaller amount, while future growth occurs in a tax-free environment.
This strategy is most effective when implemented several years before RMDs begin, but it can still play a role in broader retirement planning.
Watch the Medicare IRMAA Threshold
RMDs do not just affect your tax bill or your Social Security benefit. They can also influence your Medicare premiums.
Income-Related Monthly Adjustment Amounts (IRMAA) are based on your modified adjusted gross income. Higher income can push you into higher premium brackets for Medicare Part B and Part D.
For 2026, these thresholds begin at relatively moderate income levels, meaning even a single large total RMD could have ripple effects beyond taxes.
Managing IRMAA exposure requires coordination. Strategies such as using QCDs, spreading out withdrawals, and timing other income events can help keep your income within more favorable ranges. This is another example of why RMD planning is not just about compliance. It is about coordination across your entire financial picture.
The Bigger Picture: RMDs Are a Multi-Year Strategy
It is easy to think of RMDs as a yearly obligation. In reality, they are part of a much longer strategy.
Each withdrawal affects not only your current tax situation but also your future income, portfolio balance, and overall financial flexibility. Over time, these decisions compound.
Effective RMD planning brings together multiple elements: tax strategy, income planning, investment allocation, healthcare costs, and even estate planning. It requires looking beyond the current year and considering how each decision fits into a broader timeline.
At Goldstone Financial Group, RMD conversations are never treated as a one-time calculation. They are part of an integrated plan designed to support income stability and portfolio longevity through every market condition.
What to Do Before December 31
As the year progresses, a few proactive steps can make a meaningful difference:
- Review your 2026 RMD amount and confirm the deadline
- Choose a distribution schedule that aligns with your income needs
- Identify which accounts and assets you will draw from first
- Evaluate whether a QCD fits your charitable and tax goals
- Monitor your income relative to Medicare IRMAA thresholds
If you have not yet started RMDs, explore Roth conversion opportunities while time is still on your side.
Take the Next Step
At Goldstone Financial Group, the goal is not simply to help you take your RMD requirements for educational purposes if you are the sole beneficiary. It is to help you do it in a way that protects your portfolio and supports your long-term financial security.
Whether you are taking your first distribution or refining an existing strategy, there is often such information about a more efficient approach waiting to be uncovered.
Schedule a retirement review and let’s build a distribution strategy designed to navigate market uncertainty with clarity and confidence.
Disclosure:
Goldstone Financial Group, LLC (“GFG”) is a registered investment advisor with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or qualification. This material is provided for informational purposes only. Opinions expressed herein are solely those of GFG. None of the information presented in this material is intended to offer personalized investment advice. It does not constitute an offer to sell or solicit any offer to buy a security or any insurance product and is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. The information contained herein has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by GFG.