Strategic Timing for RMDs: Leveraging Market Highs to Optimize Retirement Distributions

Key Points

• Retirement account owners aged 73 or older must take taxable Required Minimum Distributions (RMDs) from non-Roth accounts.
• The optimal time for an RMD is when the underlying assets are valued highly, allowing a smaller proportional withdrawal from the portfolio.
• While timing can be beneficial, excessive focus on perfection is unnecessary and may be counterproductive.

If you will be 73 years of age or older at any point during 2026, you are subject to IRS rules requiring regular withdrawals from your non-Roth retirement savings.

A common consideration at this life stage is determining the right moment to take your Required Minimum Distribution. Is this particular month advantageous for such a move?

The answer is nuanced: it depends heavily on your specific investment situation. For many retirees, however, the current market environment presents a favorable window.

Think Strategically About Market Valuation

RMDs are mandatory, taxable withdrawals from retirement accounts. The exact percentage you must withdraw is based on your age. For a 73-year-old, the rate is approximately 3.8% of the account’s value as of December 31 of the previous year. This rate increases with age; for an 85-year-old, it is 6.25%. Your IRA custodian can provide your precise RMD calculation.

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The ideal timing for this withdrawal is intrinsically linked to how your retirement account is invested. If your portfolio holds stocks that have appreciated significantly this year, taking your RMD now is mathematically advantageous. By selling a position or transferring assets when prices are high, you satisfy the IRS requirement while removing a smaller percentage of your total holdings. This principle holds whether you liquidate assets for cash or execute an in-kind transfer of securities to a taxable brokerage account.

It is crucial to understand that while your portfolio’s daily value fluctuates, your RMD amount is fixed for the entire year. It is calculated solely on the prior year-end balance and does not change. Therefore, as your account value rises, the RMD represents a diminishing portion of your overall retirement savings.

Table and calculations by author.

Consequently, to maximize the amount remaining in your tax-advantaged IRA, the strategic move is to take your distribution during periods when the market is performing well—such as the present.

Avoid Paralysis by Analysis

Could the market climb even higher in the coming months, creating a more opportune moment? That is always a possibility. However, future gains are not guaranteed. What we know with certainty today is that major stock indices are up approximately 8% year-to-date. This tangible growth provides a solid foundation for action.

Furthermore, there is no rule requiring you to take your full RMD in a single transaction. You can fulfill your obligation incrementally—taking a portion now and the remainder later—effectively hedging your timing risk.

Finally, the pursuit of a perfectly timed RMD often causes more harm than good. If you are at an age where withdrawals are compulsory, it is generally unwise to overanalyze the decision. For investors who plan to keep their RMD proceeds invested in the market anyway, the long-term impact of minor timing differences is frequently minimal.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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