Financial planners warn investors against trying to time the market. It is notoriously difficult to guess exactly when sentiment on Wall Street will reverse course — even professionals are likely to get it wrong.

Yet that is essentially what countless retirees are forced to do these days — play chicken with a market roiled by 40-year-high inflation, the war in Ukraine, supply shocks and downbeat consumer sentiment.

For retirees mandated by IRS rules to take required minimum distributions from tax-deferred retirement vehicles such as individual retirement accounts or 401(k)s, the prospect of having to pull funds out during a bearish market is unpalatable enough to prompt some to tighten their belts until the market rebounds — or until Congress intervenes.

Planners report a surge of new clients who are struggling to reconcile retirement spending expectations with a suddenly diminished nest egg.


“We have a lot of new clients coming in that have to take RMDs,” said Peter Gallagher, managing director of Unified Retirement Planning Group. He discovered that some were wholly invested in riskier asset classes such as stocks, which exposed them to the market’s swoon, rather than in safer categories such as bonds. “They didn’t have the idea that they were taking as much risk as they had,” he said.

Sometimes, there is not much to do but break the bad news. “We had some people that were 100% in technology stocks, and we had to tell them, ‘Look, you’re down 40% from the high,’ ” Gallagher said. “It’s a really rough conversation, because we do have to sell.”

The ABCs of RMD

As defined-benefit pensions have been replaced by defined-contribution plans such as 401(k)s, tax deferral is an incentive for workers to save. Many retirees depend on distributions from their retirement accounts for everyday income, a need that has grown more acute as the prices of gas, groceries and other necessities continue to climb. RMD rules for account owners as well as inheritors are intended to prevent retirement accounts from becoming tax shelters for inherited wealth.

The last significant changes to those rules were made by the SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019, which raised the age by which account owners have to start taking distributions to 72 from 70½ and accelerated the timeline by which people who inherit IRAs or similar accounts must make withdrawals.

People with these accounts must begin making withdrawals by April 1 in the year after they turn 72 and continue doing so by the end of each subsequent calendar year. (Roth IRAs, which are funded with after-tax dollars, don’t require RMDs.)

The amount account owners have to withdraw varies from year to year, based on their account balance as well as their anticipated life span, and the distributions are taxed as ordinary income. People with multiple accounts have some flexibility in that the total amount of their distribution can be withdrawn from one or more accounts, but the penalty for noncompliance is steep: RMDs that are not withdrawn on time are taxed at a rate of 50%.


Cil Frazier, a retired TV marketing professional who lives in a suburb of Birmingham, Alabama, said she will have to begin taking her RMDs by April, which she is reluctant to do.

Frazier, 71 and a widow, said Social Security and a small amount of pension income were enough to pay her mortgage and most everyday expenses for the time being, but she worries about inflation driving up her cost of living.

“I’m paying more money for things I just normally buy,” she said, adding that she is bracing for higher energy bills as temperatures climb in the Southeast. “I’m shopping more carefully. I’m setting the thermostat on the air conditioner higher.”

People who help retired Americans navigate their finances are alarmed by the vulnerability that this cohort — especially historically marginalized populations — faces as a result of market gyrations. It’s especially tricky for those without money managers, because investors have to calculate on their own how much they have to withdraw to meet RMD requirements.

“It’s very complex, and it’s almost impossible for a layperson” to manage without assistance, said John Migliaccio, a consultant on senior financial literacy.

In today’s post-pension economy, Americans have had to take a more active role in managing their money before retirement, whether they have the knowledge to do so or not.


The historically long bull market before the pandemic and the quick turnaround after the plunge in the spring of 2020 lulled investors into complacency.

“The jolts that we’ve had to the market over the last several years — it was short-term impacts to the market, so people have been conditioned to think that we’re going to see a rebound pretty quickly,” said Kathy Carey, director of research and planning at Baird Private Wealth Management. “It feels like this downturn could last a little bit longer.”

How retired investors cope

Some retired people, such as Frazier, are managing by tightening their belts. Others are dusting off their resumes. What labor market observers have called “unretirement” is bringing people in the 55- to 64-year-old bracket back into the labor market.

“A lot of older people are going back into the workforce,” said Cindy Hounsell, president of the Women’s Institute for a Secure Retirement. “That’s also giving them the opportunity to catch up a little.”

Others are tapping the equity built up in their homes, said Steve Rick, chief economist at CUNA Mutual Group. “I was astounded by the increase in home-equity balances,” he said. “Home-equity lending is booming right now.”

Frazier fretted that her initial RMD could be high enough to bump her up from her 12% tax bracket. “It’s a huge jump of 10%,” she said.

She plans to wait until fall to take her initial required distribution, in the hopes that either Congress steps in or volatility eases.

Although congressional intervention would buy some time, forgoing access to those funds would be a double-edged sword, since delaying her distribution would mean putting off roughly $8,000 worth of dental work that Frazier hopes to get done. “I’m trying to save all the teeth I can,” she said.