MW Should I rush to take my RMD while the S&P 500 is down, or wait until the end of the year like normal?

By Beth Pinsker

While down markets are good for Roth conversions, market timing doesn't have the same effect on regular retirement withdrawals

Waiting for a full bounce-back from the stock market after a downturn is hard when you know you have a pending transaction. If you're over the age of 73, at some point this calendar year you have to take money from tax-deferred accounts as required minimum distributions (RMDs). Some younger retirees are in the same boat, not because the government insists, but because they need to take out regular amounts from IRAs or 401(k)s for living expenses.

Knowing when to take those withdrawals in any given year has always been something of a guessing game. Some of this is personal preference, and some is governed by maximizing tax efficiency, because the amount that comes out is considered ordinary income for the year. Most people wait until the end of the year to have a better sense of their overall tax situation so they don't push themselves into a higher tax bracket with the income. Meanwhile, some people take a lump sum at the beginning of the year, and some take monthly or quarterly draws.

This year is different from any other investors have faced, with extreme volatility and an overall decline in the S&P 500 SPX and other indexes like the Nasdaq COMP and Dow Jones Industrial Average DJIA so far. If you are facing a withdrawal, you might have an itchy trigger finger and be wondering if you should just take your RMD or yearly withdrawal now, while the market is still down. Advisers always say that down markets are good for Roth conversions, because you're basically getting a sale on the investments once you move them to the Roth account. You might think the same logic would apply to make it advantageous for RMDs, too.

But there's a key difference, which is that when you move money from a tax-deferred account into a Roth account as a conversion, the future growth is tax-free. When you take out your annual RMD or other regular withdrawal, you're either putting the money into a taxable account or spending it. The income goes on your balance sheet and any loss gets locked in, plus any future growth is subject to tax along the way for dividends and capital gains when you sell.

"I actually view the two actions - taking an RMD and doing a Roth Conversion - from different perspectives, and end up using different assets in an IRA for each one," said George Gagliardi, a certified financial planner based in Massachusetts.

For a Roth conversion, he wants to move investments at a low that has the best chance for big appreciation. For a regular withdrawal, like for an RMD, he wants to use a short-term bond or other asset that has dropped the least, so that it is essentially closest to its maximum cash value when it leaves the account.

To understand the difference, it helps if you don't think of a portfolio as a monolith - like worrying "my portfolio is down" because the S&P 500 is tumbling, when your actual holdings may not directly correlate to that index.

"Your portfolio has many parts; don't think of it as one stable unit," said Rob Williams, managing director of financial planning at Schwab. "Most retirement portfolios have some allocation to cash - like 5%, but it varies - and then short-term bonds or bond funds, and maybe intermediate bonds, and then diversified stock."

One problem that Williams pointed out is that if your retirement portfolio is devised so that the next few years of RMDs are kept in less risky investments, like Treasury bonds BX:TMUBMUSD10Y or CDs, you could face a logistical hurdle to rushing a withdrawal. Most fixed-income ladders are set up in multiyear tiers set to come due when you expect to need the cash - likely in November or December of each year for the next five to 10 years.

If you decide you want the money early, then you would be in a position to sell other investments in the account instead - and then you'd face the situation of this client from Wealthramp, a service that matches people with fee-only financial advisers. A 74-year-old retiree has a traditional IRA that was worth $850,000 at the end of 2024. That's the balance used to calculate her 2025 RMD, which comes out to roughly $33,000 based on her IRS life-expectancy factor. Now, in April, the market has dropped and her IRA balance is temporarily $790,000.

If she takes her RMD now, she'll still be required to withdraw $33,000, but because her portfolio's value has dropped, she'll have to sell more shares at lower prices to generate that same dollar amount.

"That's the problem: She's selling low to meet a requirement based on a high. It's a double negative - and a classic pitfall for retirees who act too quickly," said Wealthramp founder Pam Krueger.

Inherited IRAs might fare differently

One caveat to consider is if you're dealing with an inherited IRA, rather than a retirement account, and you are on a timeline to empty the account in 10 years. These accounts still face RMDs in those 10 years, and nonspouse inheritors have to manage the withdrawals with their own tax liability.

Scott Bishop, a wealth manager based in Texas, just had a client ask about speeding up his withdrawals while the market was down. What Bishop explained is that while he has done many Roth conversions during down markets, getting tax benefits from a withdrawal without the conversion is trickier.

If you're just reinvesting the money, rather than spending it, he suggested selling investments in the IRA, and then transferring the cash (after tax withholding) to a brokerage account. Then put that money to work in areas you think will rebound the best - which can be hard to figure out right now, given the volatility at the moment.

Bishop said the benefit to this would be that you pulled the money out at a lower tax level, so it's tax-smart when it comes to paying ordinary income. Also, you're reinvesting into areas that you hope will grow eventually and only cost capital-gains rates rather than income-tax rates.

"This could reduce your tax burden from 30%-plus to 15% to 20%, which is a good tax arbitrage," Bishop said. Any dividends you earn may also be at qualified dividend rates, rather than taxed on the way of the inherited IRA at your ordinary income-tax rate.

All of this can also be achieved a few months from now, on your regular schedule, or depending on which way the markets go from here. The one thing you can count on for all of 2025 is that your baseline RMD amount is not going to change no matter what the stock market does; that was set in stone on Dec. 31, 2024.

"So don't rush to sell assets at depressed values," said Kreuger. "Waiting gives your IRA more time to recover, and lets you defer taxes a little longer."

-Beth Pinsker

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April 10, 2025 14:08 ET (18:08 GMT)

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