A 73-Year-Old’s RMD Is Locked to Last Year’s Balance. When the Market Drops, He’s Forced to Sell Stocks at the Bottom.

The post A 73-Year-Old’s RMD Is Locked to Last Year’s Balance. When the Market Drops, He’s Forced to Sell Stocks at the Bottom. appeared first on 24/7 Wall St..

Picture a 73-year-old retiree watching his brokerage statement in spring 2026. His traditional IRA is mostly in stocks, and the market has just dropped sharply. Market volatility has been severe, pushing the VIX index above 30 recently, a level that signals meaningful investor anxiety, the kind of fear reading that usually accompanies headlines he would rather not read. He knows he must pull money from that IRA this year. What he may not have fully absorbed is that his required minimum distribution (RMD) was set months ago, before any of this volatility began.

That is the trap. He is a forced seller at exactly the wrong moment, and the rule book gives him almost no flexibility. Online retirement forums fill with the same anxious question every time stocks wobble: the market is down, my RMD is huge, do I really have to sell into this?

Why the RMD Number Does Not Care What the Market Did Today

An RMD equals the prior year’s December 31 account balance divided by an IRS life-expectancy divisor from the Uniform Lifetime Table. If his IRA closed last year at $900,000 after a strong run, that figure is locked in. A 20% drop in the first quarter does not shrink the withdrawal. He still owes the IRS a distribution calculated off the peak.

When he raises cash to meet that fixed dollar amount in a down market, he sells more shares than he would have at the prior price. Fewer shares remain to participate in any eventual rebound. That is sequence-of-returns risk, except here the IRS has made it mandatory.

The age rule matters too. RMDs begin at age 73 for those born between 1951 and 1959, and at age 75 for anyone born in 1960 or later. Our 73-year-old is in the first wave, which means this is likely one of his earliest required withdrawals, and the habits he sets now will shape the next two decades of his account.

Many retirees in their seventies carry more stock exposure than a typical advisor would suggest for someone drawing income. Stocks have rewarded patience for a long time. But a sharp market fall lands harder on people who can least afford to wait for recovery.

The Social Security Layer Most People Miss

Every dollar pulled from a traditional IRA counts as ordinary income, and that income feeds into the formula the IRS uses to decide how much of his Social Security check is taxable. A larger forced withdrawal pushes up his provisional income, which can drag more of his benefit into taxable territory, up to 85% of it.

In a year like this, he is selling stocks at depressed prices, paying ordinary income tax on the proceeds, and potentially handing back a bigger slice of his Social Security check too. The 2026 cost-of-living adjustment (COLA) of 2.8% helps at the margin, but it does not offset the damage of liquidating shares into a selloff.

What He Can Actually Do About It

The mistake hardest to undo is letting the RMD be funded entirely from whatever is in the account on the day he needs the cash. A few simple buffers change the picture:

1. Keep a year or two of expected RMDs in cash or short-term bonds inside the IRA. With the 10-year Treasury near 4.5%, the opportunity cost of holding dry powder is much lower than it was a few years ago, and it means he never has to sell stocks at a fear-driven low to satisfy the IRS.
2. Consider an in-kind transfer instead of a sale. The RMD rule requires the dollar amount to leave the IRA, not that shares be sold. Moving stock directly to a taxable account satisfies the distribution without crystallizing the loss.
3. Use a qualified charitable distribution if giving is already part of the plan. Sending part of the RMD directly to a qualified charity keeps that amount out of taxable income entirely, which can ease the Social Security tax squeeze.

A stock-heavy IRA at 73 becomes a problem when a mandatory withdrawal collides with a bad month in the market and there is no buffer between the two. Every retiree’s situation has wrinkles that matter, from account size to other income sources, so the right buffer for one person may look different for another. Building any buffer at all is what separates a tough year from a permanently smaller portfolio.

The post A 73-Year-Old’s RMD Is Locked to Last Year’s Balance. When the Market Drops, He’s Forced to Sell Stocks at the Bottom. appeared first on 24/7 Wall St..