When is the Best Time to Take Your RMD Withdrawal in a Volatile Market?

When the market is up one day and down the next, it can be difficult to know when to take your required minimum distribution. In this video, we break down smart strategies for timing your required minimum distribution withdrawals during volatile markets. You’ll learn how to avoid selling at a loss and how to use bond ladders or fixed income for stability.

Resources:

- Alliance of Comprehensive Planners: https://www.acplanners.org

- John's firm website: https://www.trinfin.com

-Find us on Facebook: www.facebook.com/friendstalkfinancialplanning

TRANSCRIPT:

Bridget: John, a question that I've got is what should I do with my required minimum distributions when the market is down and up and down and up and down, and I don't know when to take them. Hi, I'm Bridget Sullivan Mermel. I've got a fee-only financial planning practice in Chicago, Illinois.

John: And I'm John Scherer. I've got a fee-only financial planning practice in Middleton, Wisconsin. Before we jump into that RMD question, I want to remind everybody to hit that subscribe button, click thumbs up, and help other people find this information here on YouTube. And with that, I'm interested in hearing your take on this, Bridget. Maybe we can start with a little bit of background to make sure we're all talking from the same place. Getting into some financial jargon, an RMD is a Required Minimum Distribution.

What the rule basically is, is once you get to be a certain age, for some people 70 and a half and 72, now it's 73, you have to start taking distributions from your IRAs, 401(k)s, 403(b)s. The IRS makes you take some money out each year. So that's that Required Minimum Distribution or RMD. So I'm interested in hearing where the questions have been coming from for you. I've certainly got some opinions, but how do you think about taking these RMDs when the market's been as choppy as it has here in 2025?

Bridget: Yeah. So just so you know, I got this request in from a reporter and from someone that I met on vacation but not from any clients. So I'm happy about that.

John: Interesting.

Bridget: So why do I not get any questions about this from clients? I'm going to give you my answer and then we're going to get into a lot more detail. I say take it from the interest earning of the bonds so you don't even have to worry about selling the market. You should have things set up so that you got some money there that is in a bond that's maturing, that is earmarked for your cash for the year. And if you don't need it that year, then you just buy something else and keep it in the IRA. But that's how we do it. So I would say sell bonds, then you don't have to really worry about the market that much.

John: Then you're not selling stocks when the stock market's down. Pretty simple.

Bridget: Exactly. But now you look at it differently, and you've got a lot more nuanced answer. So let's go for a different answer on that.

John: I don't know that I necessarily look at it differently than you, but just from a bigger picture standpoint, my question is always what are we trying to accomplish here? I know that it's of course we have to take these RMDs. But I tend to look at it in that we've got clients that are in this position and there's sort of two paths that they take. The first path is that they're using their 401(k) or IRA money to live off of. So they need two or four or six thousand dollars a month, whatever their number is. So this RMD is sort of this thing over here, saying, “Oh, yeah, that's cute, we've got to make sure we get enough money out of your IRA,” but we're actually taking out as much or more from your living standpoint.

So for us, that lands squarely where you're saying, listen, if you need money to live off of, we want to have it in fixed income in a bond ladder of some sort so we're not worried. We're not putting the RMDs first, we're saying, listen our goal is we need cash flow, and we use CDs and Treasury strips. So we say okay, if my RMD is $30,000 a year, but I'm actually taking out $4,000 a month, or $48,000 a year, to live off of, just by reaching my goals, I've accomplished that RMD. I don't have to think about it.

So that's one place we have, and it goes exactly to your point. Now we're not selling in a down market because we're not selling stocks, we're living off bonds, just like we had planned to, sort of separate from IRAs. So for people that need the cash flow, it's just a financial planning question. So then let's make sure we get enough out of there to satisfy that RMD. I would say probably half or more of our clients are in a position where they're not using money from their portfolio, or at least not a lot to live off of.

Then for those folks they say, “Oh, no, I've got to take a $30,000 out of my IRA for my RMD.  But I don't need that money because my pension, my Social Security, and my part time job is all covering that.” From that standpoint, we kind of joke in our office and say “Well, then don't sell anything.” They say, “What do you mean? I have to take this money out in the RMD?”

But listen, if we've got XYZ mutual fund or stock or whatever it is in your IRA, we have to sell that, take it out, and then let's put it into your brokerage account and buy the exact same thing so that tomorrow our allocation or mix of stocks and bonds looks just like it does today. So, we're not selling in a down market, we're just moving from one tax bucket to another. So those are the two ways. If you need cash, then it's driven by the financial planning. And if you don't, why not just leave it in the portfolio where it belongs? That’s the thought process.

Bridget: Yeah, so one thing you're saying is that you would transfer the money directly from your IRA into this brokerage account and then just buy the same thing?

John: Yeah. It's a taxable event. That's the minimum distribution. So why change the mix? We don't have to change the mix of things just because we have to move it around.

Bridget: Yes, and the other thing is that sometimes people might get confused about the wash-sale rules, but they wouldn't apply here because you're moving it from your IRA to your taxable account. You're not selling it in your taxable account.

John: That's right. Here’s a completely different topic but a good thing to mention.  Sometimes we'll sell things and go, “Oh, we're going to take a tax loss here, but we can't just go and buy that same thing someplace else in other places. We can't just sell this account and buy that account because it violates those wash-sale rules. We have to be careful.” But this a scenario where it doesn't make any difference.

Bridget: Yeah, absolutely. Okay, so then here’s the last idea I have. Let's say the ship has sailed on having bonds. You need the money for your cash flow. Then what do you do? You can't go and buy bonds if you have it all in stocks anyway, that is going to defeat the purpose. So, I would say you can dollar-cost average selling. Let's say you need $30,000 so you can set up three dates that you have in your mind so you're not making decisions all the time. Then you say, all right, I'm going to sell $10,000, take out $10,000 from my RMD today.

Then I'm going to take $10,000 at the halfway point between now and December 15th because you want to make sure it's easy to get done and then take the last one on December 15th. So just set up some structure that you're going to simply follow and you're not going to sweat it on every different transaction. Then, at least the dollar cost averaging when you buy it shows that it helps smooth out the volatility.

John: Yeah, I love that idea of dollar cost averaging. As you said earlier, in a perfect world you'd have a nice bond ladder set up, but the world doesn't work perfectly. So when we don't have this, we can't do the thing we are talking about but I need the cash. And you know it's pretty common I think for a lot of people understand or are aware of dollar-cost averaging when making an investment. I'm going to put $500 a month into my 401(k) plan and if the market goes up, I've got, you know, little bits that have gone up with it.

If the market goes down, I'm buying at cheaper prices in the future. The exact same thing works in reverse. If we've got a stock-based portfolio we have to take money out rather than taking one lump sum out which is the risk that you're hearing about in that question. What if I take this out and I happen to pull all that money out the day that the market's down 5%?

Now I've lost all that money. So listen, take chunks out.

You can take it in three chunks as you described, even in monthly chunks. Have it set up where it automatically does this. We've had some really good success with that. Not necessarily from the required minimum distribution standpoint because like people who work with you, if you're a client, we're going to set it up so you’ve got those bonds at fixed income. You have to worry about this.

But we've had folks that have Individual stock positions. Their company got sold, they inherited something, they want to know what do to do about this from a tax standpoint, they thought well sell it all. We’d say let's go out and sell it in chunks. If the stock keeps on going up, great. I've got some of it that I'm not going to sell for six months or a year that's going up. And, and if the stock takes a dive or this mutual fund takes a dive, then we got some out right away.

This dollar cost averaging is such a powerful thing. I will say the one crucial thing in our experience is having a plan and sticking to it. Because you know something will happen. In today's world new tariffs will be added or taken away or this or that happens. You will think well maybe we should wait until next month?

Bridget: Yes, or I saw inflation on the headline.

John: Yeah, exactly so stick to the plan. This is what makes you successful and helps you from getting whipsawed on these things. That's the question, how do I know if I'm going to make a bad decision and time it incorrectly? Well, if you make the decision up front and stick to it, then you don’t have to worry about the emotions taking over.

Bridget: So, with that, it's a great time to wrap up. I'm, Bridget Sullivan Mermel. I've got a fee-only financial planning practice in Chicago, Illinois.

John: And I'm John, Scherer. I've got a fee-only financial planning practice in Middleton, Wisconsin. Both Bridget and I are taking on new clients. We'd love to hear from you directly, but we're also both members of the Alliance of Comprehensive Planners. If you like what you hear on our show and would like to find a planner who's local to your area, you can check out acplanners.org.

Bridget: Don't forget to subscribe.

At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.