How can I decide what to sell when the market is down?


Q. My IRA has gotten slammed, but my Required Minimum Distribution (RMD) will be based on last year’s closing balance. How can I decide what to sell so I take a big enough RMD?
— Investor

A. You’re not alone in your retirement account getting slammed in this volatile market.

Indeed, the volatility makes withdrawing money from an account a difficult decision.

There is no perfect solution, said Alexandra Makowski, a certified financial planner with CFS Investment Advisory Services in Totowa.

She said if you can afford to do it, wait to see how the market performs after midterm elections before you sell investments to raise funds for your RMD.

October of an election year is historically a more volatile month, she said.

“This year, is not only an election year, but we also have high inflation, pressure on supply chains, and negative year-to-date stock and bond performance,” she said. “Historically, the market does rally post-election.”

If this happens, it could alleviate some pressure on your portfolio, Makowski said.

Because the markets are negative for the year, an argument could be made to sell across your portfolio to keep your stock-to-bond allocation intact, she said.

“In more traditional market conditions, it would be better to sell from bonds to allow stocks to recover,” she said. “Although this theory remains true, doing so will increase the overall risk in your portfolio, which exposes the account to more potential volatility over the next 12 months.”

So as we said before, there is no perfect choice.

Makowski said she advises her clients to keep one to three years of estimated RMDs in cash to lessen the risk of having to raise money in volatile or negative performance years.

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This story was originally published on Oct. 26, 2022. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.