No Result
View All Result
SUBMIT YOUR ARTICLES
  • Login
Wednesday, October 29, 2025
TheAdviserMagazine.com
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
No Result
View All Result
TheAdviserMagazine.com
No Result
View All Result
Home Financial Planning

Financial advisors are torn over this RMD tax strategy

by TheAdviserMagazine
6 months ago
in Financial Planning
Reading Time: 4 mins read
A A
Financial advisors are torn over this RMD tax strategy
Share on FacebookShare on TwitterShare on LInkedIn



Required minimum distributions can be a touchy subject for retirees and their financial advisors, requiring them to liquidate assets that they may prefer to keep in the market. Frustration around RMDs is often compounded by the tax consequences they present, but advisors say one little-known strategy could help ease the burden — especially as investors wait for stocks to fully recover from a tariff-driven downturn.

The strategy hinges on the unique flexibility of tax withholdings on retirement account distributions. 

The idea of withholding income taxes from a retirement account distribution isn’t new. Retirees often withhold a set percentage, say 20%, of a distribution for taxes. For example, a retiree can say, “Distribute $20,000 from my IRA, withhold 20% for taxes and send the net $16,000 to me.” But what many advisors miss is the ability to delay tax payments until the end of the year, according to Keith Fenstad, vice president and director of wealth planning at Tanglewood Total Wealth Management in Houston, Texas.

READ MORE: Using tax-aware long-short vehicles to track down alpha

Through this strategy, retirees can take smaller monthly or quarterly distributions without any tax withholding and then make a much larger tax withholding on a distribution toward the end of the year. Thanks to flexible RMD tax payment rules, end-of-year tax withholdings can cover distributions that were made much earlier in the same year.

“Even if that request is made in December, the $4,000 of taxes withheld is spread across the previous quarterly tax payment periods,” Fenstad said.

Kicking the tax can down the road

Delaying tax payments on RMDs can offer a few key advantages, according to Fenstad. For some clients who simply don’t want the headache of making multiple tax payments throughout the year, delaying tax withholdings on RMDs can simplify the process.

“We have clients who might withhold 60%, 70% of their RMD just to cover all their taxes,” Fenstad said. That way, “They don’t have to fool with quarterly estimates.”

This approach can also help address a potential underpayment penalty resulting from a previously missed estimated tax payment, he said. Delaying tax withholdings on RMDs could be an especially useful strategy for certain clients who expect their investments to continue to recover from April’s market low, Fenstad said.

READ MORE: HSA limits to get a modest bump

Mark Stancato, founder and lead advisor at VIP Wealth Advisors in Decatur, Georgia, described the strategy as a “calculated risk.”

“Delaying the timing of an RMD until later in the year can be an effective way to improve tax efficiency during a market downturn — but the details matter. The key question to ask is where the tax payment is coming from,” he said. “If taxes are withheld directly from the RMD distribution, delaying until year-end may reduce the number of shares that need to be sold — especially if the market recovers. That can help clients avoid locking in unnecessary losses. But if the market declines further, they could end up selling even more at lower prices.”

Other advisors say that delaying tax withholdings can be a helpful strategy regardless of how the market is performing.

“Waiting to sell shares to pay the tax because of a belief that the market will rise is a market timing decision,” said Sammy Grant, principal at Homrich Berg in Sandy Springs, Georgia. “But even if a client or advisor believes the market will experience further declines, waiting to pay the tax due on early-year distributions until year-end is a wise decision. This more pessimistic client can liquidate enough to pay the tax today while leaving the proceeds in a money market inside the IRA, earning 4%-plus for the remainder of the year.”

Not all advisors are on board

Tim Witham, founder of Balanced Life Planning in Villa Hills, Kentucky, said that delaying RMD tax withholdings is a common strategy among some advisors. However, he explained that this approach is often not ideal for many high net worth clients, as they are typically required to take larger distributions than they need for their living expenses. Instead, Witham and other advisors suggest using in-kind withdrawals from a retirement account to a brokerage account to limit a client’s tax liability.

“In a down market, rather than selling funds for IRA distributions, I have coached clients to push securities out of their IRAs in-kind to a brokerage account,” Witham said. “For example, if a small-cap fund in your IRA is down 20%, you can take that fund from an IRA to a brokerage account. … When the fund rebounds, it will do so outside of the IRA, where, if held over a year, the gain would be eligible for long-term capital gains treatment, rather than ordinary income that would occur as a result of an IRA distribution.”

READ MORE: Forget retirement buckets. Advisors prefer these withdrawal strategies

“This strategy puts control with the client and advisor in a down market, rather than hoping for a market rebound by year-end,” he added. “As we all know, hope is not a strategy.”

Other advisors say that navigating a down market through such strategies simply isn’t necessary if a client is invested properly in their retirement accounts. 

“We advise our clients who have reached the magical age of required minimum distributions that there should be a minimum of five years’ worth of distributions invested in liquid high-quality short-term fixed income,” said Michael DeMassa, founder of Forza Wealth in Sarasota, Florida. “In other terms, at least 20% of the IRA should be accessible for required minimum distributions and not subject to stock market volatility. During times of market stress, we can make distributions from the fixed income allocation and not be forced to sell equities at the wrong time.”



Source link

Tags: advisorsfinancialRMDStrategytaxTORN
ShareTweetShare
Previous Post

2025 High ROIC Stocks List

Next Post

Solana network rebounds with record $35.6 billion DEX volume and 58% TVL surge

Related Posts

edit post
Advisors still in ‘collective dabbler’ stage of AI adoption

Advisors still in ‘collective dabbler’ stage of AI adoption

by TheAdviserMagazine
October 28, 2025
0

Most financial advisors are still in the "collective dabbler" stage when it comes to adopting artificial intelligence, interested in its...

edit post
How RIAs can land their first high net worth client

How RIAs can land their first high net worth client

by TheAdviserMagazine
October 28, 2025
0

This is the 24th installment in a Financial Planning series by Chief Correspondent Tobias Salinger on how to build a...

edit post
Best Things to Buy on Black Friday (and What Not To)

Best Things to Buy on Black Friday (and What Not To)

by TheAdviserMagazine
October 28, 2025
0

Every year around this time, I find myself asking the same question: “What’s actually worth buying on Black Friday?” I...

edit post
AI-fueled cyberattacks make security more challenging

AI-fueled cyberattacks make security more challenging

by TheAdviserMagazine
October 28, 2025
0

Takeaways:Large language models are more vulnerable to AI-powered attacksCompanies need to have cyber defense plans ready to goDefenses and insurance...

edit post
Episode 232. “My husband gives me an allowance. I feel like a child.”

Episode 232. “My husband gives me an allowance. I feel like a child.”

by TheAdviserMagazine
October 28, 2025
0

Edward (38) and Ellen (30) live in Hawaii with their young daughter and a new baby on the way. With...

edit post
Inside the New Salt Lake City Delta Sky Club: Giant and Cozy

Inside the New Salt Lake City Delta Sky Club: Giant and Cozy

by TheAdviserMagazine
October 28, 2025
0

The new Delta Sky Club in the B Concourse at Salt Lake City International Airport (SLC) manages to feel cozy...

Next Post
edit post
Solana network rebounds with record .6 billion DEX volume and 58% TVL surge

Solana network rebounds with record $35.6 billion DEX volume and 58% TVL surge

edit post
5 Things To Know About the GasBuddy Card

5 Things To Know About the GasBuddy Card

  • Trending
  • Comments
  • Latest
edit post
77-year-old popular furniture retailer closes store locations

77-year-old popular furniture retailer closes store locations

October 18, 2025
edit post
Pennsylvania House of Representatives Rejects Update to Child Custody Laws

Pennsylvania House of Representatives Rejects Update to Child Custody Laws

October 7, 2025
edit post
What to Do When a Loved One Dies in North Carolina

What to Do When a Loved One Dies in North Carolina

October 8, 2025
edit post
Another Violent Outburst – Democrats Inciting Civil Unrest

Another Violent Outburst – Democrats Inciting Civil Unrest

October 24, 2025
edit post
Probate vs. Non-Probate Assets: What’s the Difference?

Probate vs. Non-Probate Assets: What’s the Difference?

October 17, 2025
edit post
California Attorney Pleads Guilty For Role In 2M Ponzi Scheme

California Attorney Pleads Guilty For Role In $912M Ponzi Scheme

October 15, 2025
edit post
Copper hits record on mine supply issues, US-China tension easing boosts rally

Copper hits record on mine supply issues, US-China tension easing boosts rally

0
edit post
How to Close 32% More Sales & Build a Firm Full of Your Ideal Clients

How to Close 32% More Sales & Build a Firm Full of Your Ideal Clients

0
edit post
Regurgitative AI: Why ChatGPT Won’t Kill Original Thought – Faculty Focus

Regurgitative AI: Why ChatGPT Won’t Kill Original Thought – Faculty Focus

0
edit post
Applying for SSDI for Severe Kyphosis | Boston Disability Lawyer

Applying for SSDI for Severe Kyphosis | Boston Disability Lawyer

0
edit post
5 Ways to Take Early Retirement Withdrawals Without Paying a Penalty

5 Ways to Take Early Retirement Withdrawals Without Paying a Penalty

0
edit post
How Bupa’s CEO Iñaki Ereño woke a sleeping giant—and set a 100,000 strong workforce running toward digital health 

How Bupa’s CEO Iñaki Ereño woke a sleeping giant—and set a 100,000 strong workforce running toward digital health 

0
edit post
Copper hits record on mine supply issues, US-China tension easing boosts rally

Copper hits record on mine supply issues, US-China tension easing boosts rally

October 29, 2025
edit post
How Bupa’s CEO Iñaki Ereño woke a sleeping giant—and set a 100,000 strong workforce running toward digital health 

How Bupa’s CEO Iñaki Ereño woke a sleeping giant—and set a 100,000 strong workforce running toward digital health 

October 29, 2025
edit post
How Tariffs Hurt the Ones You Love

How Tariffs Hurt the Ones You Love

October 29, 2025
edit post
Trump Media And Crypto.Com Unveil Predictions Market Partnership

Trump Media And Crypto.Com Unveil Predictions Market Partnership

October 29, 2025
edit post
Metal sector remains a trading play, not a structural Bet: Dhananjay Sinha

Metal sector remains a trading play, not a structural Bet: Dhananjay Sinha

October 29, 2025
edit post
Bitcoin treasury company Sequans moves 970 BTC to Coinbase Prime

Bitcoin treasury company Sequans moves 970 BTC to Coinbase Prime

October 29, 2025
The Adviser Magazine

The first and only national digital and print magazine that connects individuals, families, and businesses to Fee-Only financial advisers, accountants, attorneys and college guidance counselors.

CATEGORIES

  • 401k Plans
  • Business
  • College
  • Cryptocurrency
  • Economy
  • Estate Plans
  • Financial Planning
  • Investing
  • IRS & Taxes
  • Legal
  • Market Analysis
  • Markets
  • Medicare
  • Money
  • Personal Finance
  • Social Security
  • Startups
  • Stock Market
  • Trading

LATEST UPDATES

  • Copper hits record on mine supply issues, US-China tension easing boosts rally
  • How Bupa’s CEO Iñaki Ereño woke a sleeping giant—and set a 100,000 strong workforce running toward digital health 
  • How Tariffs Hurt the Ones You Love
  • Our Great Privacy Policy
  • Terms of Use, Legal Notices & Disclosures
  • Contact us
  • About Us

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.