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Market declines can be stressful enough, particularly for retirees who must take a required minimum distribution (RMD).
Generally, once you reach age 73, the government requires you to begin taking distributions every year from your retirement accounts, such as your 401(k) and traditional IRA, regardless of how the market is performing. The age limit for RMDs climbs to 75 effective January 1, 2033.
Selling assets when your account value is depressed, however, can be a bitter pill to swallow after the decades you spent building up your nest egg up.
Selling investments during a market decline may reduce the amount that remains invested to participate in a later recovery. This can be especially important when withdrawals occur early in retirement, especially if you liquidate devalued stocks in the years immediately after your RMDs begin — a financial concept known as sequence of returns risk. (Related: Beware retirement’s overlooked risk: Sequence of returns)
“When markets have sold off, selling holdings that have significantly declined can lock in losses and reduce the portfolio’s ability to rebound in a market recovery,” said Michael Enright, a financial professional with Baystate Financial in Wakefield, Massachusetts. “While the RMD must still be satisfied to avoid penalties, retirees may consider various methods to meet the distribution requirement without automatically selling depreciated assets.”
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Planning ahead is key, said Bryan Bibbo, president of Prosperity Capital Advisors in Avon, Ohio.
“RMDs are required whether the market is up or down, so the planning really needs to happen before volatility shows up,” he said. “That is why retirees should have a well-structured income strategy, not just an investment allocation. The mistake that many retirees make is waiting until their RMD is due and then asking, ‘What should we sell?’”
Individuals who are approaching RMD age or already subject to RMDs may want to discuss the following considerations with a qualified professional:
- Taking their RMD in kind.
- Drawing from their cash or fixed-income buckets first.
- Making a qualified charitable distribution (QCD) to an eligible charity to help reduce their tax burden.
- Reinvesting after-tax RMD proceeds, if appropriate.
What are RMDs and how do they work?
First, though, a quick reminder of how RMDs work.
If you were born from 1951 to 1959, you generally must start taking RMDs the year you turn 73. Those born in 1960 or later must begin taking RMDs at age 75.1 Why? The IRS wants its share.
RMD rules generally apply to traditional IRAs and many employer-sponsored retirement accounts, including traditional 401(k), 403(b), and governmental 457(b) accounts. Roth IRAs and Roth 401(k)s are not subject to RMDs during the original owner’s lifetime because contributions to those accounts are made on an after-tax basis.
An RMD is calculated based on two factors: the retirement account balance as of the end of the previous year divided by the applicable distribution period under IRS tables. So, for example, your RMD in 2026 is based in part on the balance of your retirement account as of Dec. 31, 2025.
The penalty for failure to take your RMD in full is significant: a 25 percent excise tax on the amount not withdrawn (reduced to 10 percent if corrected within the specified correction period.)
Depending on the type of retirement account you own, you may also be subject to IRS aggregation rules. For example, if you own multiple IRAs, you can take your total RMD from just one of your IRAs in any given year. But if you own multiple 401(k)s, you must calculate and satisfy your RMDs separately for each plan, which requires a withdrawal from each of your 401(k)s.2
Strategy #1: Take your RMD in kind without selling a single share
Having to sell shares when your retirement account balance has lost value can be costly and may not be necessary.
If you believe those securities have room to grow and would like to keep them invested, you can potentially satisfy your RMD by taking an in-kind distribution instead.
An in-kind distribution may allow you to transfer eligible assets — stocks, mutual funds, ETFs — directly from your IRA to a taxable brokerage account without liquidating them first, which allows the securities to remain invested and gives them time to potentially rebound in the event of a future market recovery, which of course is not guaranteed.
The fair market value of those assets on the date of the transfer counts toward your RMD for the year, satisfying your legal obligation.
“An in-kind distribution allows the investor to transfer securities directly from their IRA to a taxable account rather than selling them and taking cash,” said Enright. “The investment remains fully invested and positioned to potentially participate in a market recovery.”
Be aware that you will still owe ordinary income tax on the value of the transferred assets in the year you make the in-kind transfer — the in-kind approach doesn't eliminate your tax obligation. The taxable amount generally reflects the fair market value of the assets on the date of transfer. By moving those securities into a brokerage account, you could potentially capture any future growth at the lower long-term capital gains tax rate for investments held for more than one year.
It is important to note that in kind transfers, by design, do not generate any cash, which you might otherwise realize by selling securities. Thus, you must be prepared to use other sources of available cash or sell other assets to pay your RMD tax bill.
Strategy #2: Draw from your cash or fixed-income bucket first for your RMD
As you monitor your retirement account during market downturns, you may notice that not every asset will have declined equally.
Money market funds, stable value funds, short-term bonds, or cash equivalents may have held their value — or even gained — when equities fell.
If that’s the case, some investors may choose to satisfy distributions using cash or fixed-income holdings first during a market decline, giving your stock holdings more time to participate in any future market recovery.
Some financial professionals recommend maintaining a cash or fixed-income "bucket" in retirement for just such an occasion — to fund RMDs (and living expenses) during downturns without disturbing equity holdings. (Learn more: Understanding the bucket approach to retirement)
“If an individual has cash, short-term fixed income, or a ‘soon’ bucket designed for near-term distributions, they may have additional flexibility in determining how to satisfy their RMD,” said Bibbo. “In some cases, using cash holdings first can make sense — especially if that cash was intentionally set aside for near-term income needs.”
That said, cash should generally not be viewed as a long-term wealth-building asset.
Over long periods of time, cash has historically struggled to keep pace with inflation compared to growth-oriented investments, said Bibbo. So, while cash can be useful for near-term distributions, holding too much cash for too long can create purchasing power risk.Strategy #3: Consider a Qualified Charitable Distribution (QCD)
If you don’t need your RMD for living expenses and are charitably inclined, you may be able to direct up to $111,000 per year (2026 limit, indexed for inflation) from eligible IRAs directly to a qualified charity — which would count toward your RMD. (Learn more: QCDs: A charitable move with tax and RMD benefits)
Gifting appreciated assets through a QCD could potentially be a useful tax management strategy in any market. Why?
Standard RMD withdrawals often inflate your income, which could bump you into a higher tax bracket or trigger higher Medicare premiums.
With a QCD, however, the distribution never passes through your hands, so it gets excluded from your adjusted gross income. As such, it could potentially:
- Reduce your income tax liability.
- Lower your Medicare premiums (which are based on income for high earners).
- Reduce taxation of your Social Security benefits (also based on your income).
- Help you optimize your philanthropic goals.
During a stock market decline, QCDs may offer an additional advantage for retirees who wish to support a favorite charity and do not need their RMD for living expenses. By transferring devalued shares directly from an IRA to an eligible charity, you can potentially satisfy your mandatory RMD, avoid paying income tax on the distribution, and prevent locking in losses by selling depressed assets to meet required distributions.
It’s important to note that QCDs must be handled carefully, going directly from the IRA custodian to the charity to avoid being treated as a taxable distribution. Even if you're not yet subject to RMDs, you can start making QCDs at age 70½ to reduce your future taxable account balance.
Strategy #4: Consider options for your RMD proceeds
Some retirees don’t need their RMDs for living expenses. They have pension income, Social Security, or other available assets.
If you don’t plan to deploy any of the previously mentioned strategies during a stock market slide and you choose instead to liquidate a portion of your portfolio to meet your RMD obligation, you can still potentially put those dollars back to work by:
- Reinvesting your distribution in a taxable brokerage account. Any future earnings may receive capital gains tax or qualified dividend treatment, depending on the investment, holding period, and tax rules in effect. (Related: Asset allocation strategy)
- Using the proceeds to fund a Roth IRA, if eligible, where earnings can grow tax-free. But tread carefully. You cannot directly use your RMD proceeds to contribute to a Roth IRA, because Roth IRAs must be funded with “earned income.” Investment proceeds, capital gains, and other sources of passive income cannot be used. If you are eligible to contribute to a Roth IRA based on your taxable compensation, however, you can potentially take an amount equivalent to your after-tax RMD from other accounts and use that to fund your Roth IRA. Roth IRAs are not subject to mandatory withdrawals during the owner’s lifetime, making them a potentially advantageous wealth-transfer vehicle. In 2026, those 50 and older can contribute a total of $8,600 to an IRA.
- Funding a 529 college savings account for your grandchildren. Thanks to simplified FASFA rules that took effect in 2024, 529 accounts owned by someone other than the beneficiary’s parent will no longer affect the child’s eligibility for need-based financial aid.
The bottom line: You may have more control than you think
An RMD does not necessarily require selling depreciated assets and doesn’t mean accepting losses, even during periods of market volatility. Different approaches can help you meet your RMD obligations while considering liquidity needs, tax consequences, and the ability to participate in future market movements.
Strategies such as taking your distribution in-kind and liquidating cash during periods of market decline can potentially be effective, but they work best when planned in advance.
Consider speaking with a MassMutual financial professional today about how an RMD may fit into your overall retirement income plan.
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Frequently asked questions about taking RMDs when the market is down
Q: Can I skip my RMD if the stock market is down and I don't want to sell at a loss?
A: Unfortunately, no. Generally, once you reach age 73, the IRS requires you to take a minimum distribution from retirement accounts every year, regardless of market conditions. Missing your deadline results in a steep additional tax: a 25 percent excise tax on the amount you should have withdrawn (reduced to 10 percent if you correct the shortfall within the specified time period ).
Q: What exactly is an in kind RMD distribution and how might it be used during a down market?
A: An in-kind distribution means you transfer securities — shares of stocks, mutual funds, or ETFs — directly from your traditional IRA to a taxable brokerage account, without first selling them. The fair market value of those assets on the date of transfer counts toward your RMD for the year, satisfying your RMD obligation. The possible advantage in a down market is that your investments stay intact and remain positioned for a potential recovery, rather than being sold at a depressed price to generate cash.
Q: Is there a way to satisfy my RMD and also do some good — without increasing my tax bill?
A: Yes. If you are age 70½ or older, a qualified charitable distribution (QCD) may allow you to transfer up to $111,000 directly from your IRA to a qualified charity (the 2026 limit, which is indexed annually for inflation). That amount counts toward your RMD for the year, but because the money goes straight from your IRA custodian to the charity, it is not counted as taxable income, which could lower your Medicare premiums and the tax you might owe on Social Security benefits.
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1 Different starting dates may apply to certain employer-sponsored plans.
2 Internal Revenue Service, “RMD comparison chart (IRAs vs. defined contribution plans),” Dec. 10, 2025.
