Shelby French of Lexington, Ky., is a lifelong saver who thought she was financially well-prepared for retirement. What she wasn’t counting on were market gyrations that sent her investments plunging by $60,000 over a three-day period this spring.
“I have my portfolio set to moderate risk; we haven’t changed a ton in the past few years,” she said — but the prospect of more market volatility has prompted her to rethink that approach.
Ms. French, 75, is of an age when the I.R.S. requires people with traditional, tax-deferred retirement accounts like 401(k)s and individual retirement accounts to draw down some of that money — and pay income tax on it or incur penalties. These required minimum distributions — frequently referred to by the abbreviation R.M.D.s — can be painful when retirees have to sell assets in a falling market.
“I use my R.M.D. money to pay big things, like long-term care premiums, my property taxes, insurance,” Ms. French said. This year, she went against the advice of her financial advisers and withdrew the money she knew she would be required to take in a single lump sum in January rather than spread out the withdrawals over the course of the year.
“I knew it wasn’t going to be good,” she said. “I figured it was better to get it out.”
The Trump administration’s tax, trade and immigration policies all have the potential to raise inflation and constrain economic growth. Uncertainty over tariffs has led businesses to hold off on hiring, expanding and investing. Tax legislation being negotiated in Congress is projected to add to the nation’s debt, which recently prompted the ratings firm Moody’s to downgrade the country’s credit rating.
Broadly, the stock market has regained the ground it lost in the springtime. Investors, caught by surprise at the size and scope of the president’s tariff ambitions in April, sent the broad-based S&P 500 index tumbling nearly into bear market territory — defined as a drop of 20 percent from a recent high. Yields on long-dated U.S. government bonds, typically considered among the world’s safest investments, climbed and remain elevated from where they were a year ago, an indication of investor wariness about the country’s financial stability. (Bond yields rise when their prices fall.)
“There are many concerns around inflation and what that may look like over the long term,” said Nick Campanale, senior vice president at Citizens Private Wealth, part of Citizens Bank.
“I definitely hear a lot of people who are worried about R.M.D.s,” said Scott Cole, founder and president of Cole Financial Planning and Wealth Management. He added that he has heard from more prospective clients who want to work with a financial adviser specifically to get help navigating the effect R.M.D.s. will have on their retirement income.
Mr. Cole said he also had clients concerned that their required distributions could increase their taxable income to a level that triggers a surcharge on their Medicare premiums, potentially increasing their medical expenses by hundreds of dollars a month.
Financial advisers say savers who are afraid their money won’t go as far in retirement are often tempted put their money into riskier investments to make up the perceived shortfall. In reality, this can leave their nest eggs dangerously overexposed in the event of a market downturn, said Christopher Briscoe, director of financial planning at Girard, a Univest Wealth Division.
“That might lead retirees to be more aggressive than they should be,” he said.
Since mandated distribution amounts are calculated based on the balance in people’s retirement accounts at the end of the previous calendar year, losing money in the market means they have to withdraw a proportionately larger amount to meet their required minimum.
“It feels like this has happened a lot — you get a market turn in January and all of a sudden, you’re taking an R.M.D. off a December balance that doesn’t exist anymore,” said Tim Steffen, director of advanced planning at Baird. “Now your percentage you have to take out becomes much higher.”
“Forcing withdrawal in down markets can make it almost a double whammy,” Mr. Campanale said. In particular, negative returns early in retirement can make savings dwindle more quickly than planned because people’s investments don’t get a chance to recover, which can hurt retirees’ financial security for years to come. “That can drastically change what their retirement spending can look like,” he said.
That’s not the only challenge retirees must confront. The Trump administration’s aggressive stance toward government agencies and institutions like the Social Security Administration is also ramping up Americans’ collective anxiety. Although polls have shown for some time that skepticism about the long-term health of Social Security has been pervasive among younger adults, more recent surveys show that this gloomy outlook has begun to take hold among older Americans, as well. An online survey of more than 1,400 non-retired Americans conducted in April on behalf of the website DepositAccounts found that 70 percent of respondents between the ages of 45 and 60 expressed the belief that Social Security won’t be available for them when they retire.
This year, Ms. French said she was socking away her year’s worth of retirement distributions into a high-yield savings account. “I put all my R.M.D. in savings because who even knows if Social Security is going to exist, with DOGE and all,” she said, referring to the cost-cutting effort known as the Department of Government Efficiency that was led, until recently, by the billionaire Elon Musk. “All this stuff that’s going on, it sort of undermines your confidence.”
How to manage retirement withdrawals in a volatile market.
Congress changed some rules for retirement account withdrawals with the 2022 law known as the Secure Act 2.0. Beginning in 2023, it raised the age at which people born between 1951 and 1960 must start taking withdrawals to 73 from 72. People born in 1960 or later will have until they turn 75 to begin taking R.M.D.s.
Although the exact amount a person must withdraw varies from year to year, it’s possible to come up with an estimate by looking at the previous year’s figure or using the calculator tool at Investor.gov. Financial advisers recommend that people keep an amount roughly equal to their R.M.D. out of stocks to avoid having to sell in a falling market.
“If you’re concerned about inflation being more aggressive due to tariff policy, then the lesson would be to raise the cash now,” said Jonathan Lee, an investment portfolio manager at U.S. Bank Private Wealth Management. “You can essentially maintain a cash bucket if you know what your R.M.D. is for 2025.”
This pool of funds should be separate from an emergency fund, Mr. Lee specified. It should be held in a money-market account or similar low-risk vehicle within one’s retirement account until taking the withdrawal. “There is no goldilocks answer,” he added, “but there are ways to prepare.”
A market environment like the present, when stocks have mostly recovered their losses from earlier this year, would be a good opportunity to move those assets into lower-risk vehicles, but Mr. Steffen said it can be hard convincing clients to shift money into lower-return investments when stocks are ascendant.
“The problem they have is, they don’t want to sell when the market is high, because they want to keep enjoying the ride if it’s going well,” he said.
Mr. Steffen suggested that people with income-producing assets such as dividend-producing stocks or mutual funds can save toward their R.M.D.s by keeping that yield in cash — say, in a money-market account — within the retirement account rather than reinvesting it. “A lot of times, people will automatically reinvest those dividends. Maybe instead of doing that, you just keep that cash,” he said.
Withdrawals can generally be taken any time over the course of a year. People who take their withdrawals monthly because they need their required distribution to meet everyday living expenses have fewer options for avoiding selling at a loss because they have less leeway about the timing of their withdrawals.
Alvina Lo, chief wealth strategist at Wilmington Trust, says these people should take a granular look at the individual funds, stocks or other assets in their retirement accounts. “Look for assets that have appreciated. Maybe sell those off first so you can lock in the gain,” she said, since you know you’re going to need to take that money out at some point during the year.
Regular withdrawals — say, monthly — over the course of a year can be strategically smart, Ms. Lo added, because those taken when the market is up help balance out withdrawals taken at a loss. “It’s kind of like the opposite of dollar-cost averaging,” she said, referring to the practice of buying into the market at regular intervals, the idea being that buying high versus buying low will eventually even out.
For retirees who view their retirement accounts as a financial legacy to leave their children or grandchildren, a plunge in asset prices can be a good opportunity to convert those assets to a Roth I.R.A., since the tax owed will be lower. “It’s a little bit of making lemonade out of lemons,” Ms. Lo said.
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