How to Draw Down Your Retirement Savings When the Markets Are Gyrating

New York Times

9 hours ago

Shelby French of Lexington, Ky., is a lifelong saver who thought she was financially well-prepared for retirement. What she wasn't counting on were market gyrations that sent her investments plunging by $60,000 over a three-day period this spring.
'I have my portfolio set to moderate risk; we haven't changed a ton in the past few years,' she said — but the prospect of more market volatility has prompted her to rethink that approach.
Ms. French, 75, is of an age when the I.R.S. requires people with traditional, tax-deferred retirement accounts like 401(k)s and individual retirement accounts to draw down some of that money — and pay income tax on it or incur penalties. These required minimum distributions — frequently referred to by the abbreviation R.M.D.s — can be painful when retirees have to sell assets in a falling market.
'I use my R.M.D. money to pay big things, like long-term care premiums, my property taxes, insurance,' Ms. French said. This year, she went against the advice of her financial advisers and withdrew the money she knew she would be required to take in a single lump sum in January rather than spread out the withdrawals over the course of the year.
'I knew it wasn't going to be good,' she said. 'I figured it was better to get it out.'
The Trump administration's tax, trade and immigration policies all have the potential to raise inflation and constrain economic growth. Uncertainty over tariffs has led businesses to hold off on hiring, expanding and investing. Tax legislation being negotiated in Congress is projected to add to the nation's debt, which recently prompted the ratings firm Moody's to downgrade the country's credit rating.
Broadly, the stock market has regained the ground it lost in the springtime. Investors, caught by surprise at the size and scope of the president's tariff ambitions in April, sent the broad-based S&P 500 index tumbling nearly into bear market territory — defined as a drop of 20 percent from a recent high. Yields on long-dated U.S. government bonds, typically considered among the world's safest investments, climbed and remain elevated from where they were a year ago, an indication of investor wariness about the country's financial stability. (Bond yields rise when their prices fall.)
Want all of The Times? Subscribe.