How Rising Inflation Impacts Required Minimum Distributions (RMDs)

Understanding the Connection Between Inflation and RMDs

Inflation doesn’t just affect grocery bills and gas prices—it also impacts how far your retirement dollars stretch. For retirees subject to Required Minimum Distributions (RMDs), rising inflation can complicate long-term income planning and tax efficiency.

RMDs are the mandatory withdrawals retirees must take from tax-deferred accounts like Traditional IRAs, 401(k)s, and 403(b)s once they reach age 73 (or 75 under SECURE Act 2.0). The IRS calculates RMDs based on life expectancy and account balance at the end of the previous year.

But here’s the catch: when inflation rises, the purchasing power of your withdrawals declines—even if your RMD amount increases slightly year over year.

How Inflation Erodes Retirement Income

Inflation reduces the real value of every dollar you withdraw. For example, if inflation runs at 4% annually, a $50,000 RMD taken today will only have the equivalent purchasing power of about $48,000 next year.

That means retirees relying solely on RMDs may find themselves withdrawing more to maintain their lifestyle—potentially accelerating tax liabilities and depleting their accounts faster than planned.

Market Volatility and RMD Timing

Inflation often goes hand in hand with market volatility. When markets are down but inflation is up, retirees face a double risk:

• Selling investments at lower prices to meet RMD obligations.
• Losing purchasing power due to rising costs.

Fiduciary advisors often recommend strategic timing of RMDs or using qualified charitable distributions (QCDs) to offset taxable income while supporting causes you care about.

Strategies to Inflation-Proof Your RMD Plan

A fiduciary financial advisor can help retirees balance income needs, tax efficiency, and long-term growth potential. Key strategies may include:

1. Diversifying Retirement Income Sources
   Use a mix of taxable, tax-deferred, and tax-free accounts (like Roth IRAs) to manage distributions more flexibly.
2. Roth Conversions Before RMD Age
   Converting portions of your traditional IRA into a Roth IRA before RMDs begin can reduce future taxable distributions.
3. Investing for Inflation Protection
   Incorporate assets such as Treasury Inflation-Protected Securities (TIPS), dividend-paying stocks, or real assets that tend to perform better in inflationary periods.
4. Reassessing Spending Needs Annually
   A fiduciary advisor can help you review your withdrawal strategy each year, adjusting for inflation, market conditions, and tax law updates.

Why Fiduciary Advice Matters More Than Ever

Fiduciary financial advisors act in your best interest—not to sell products, but to create strategies aligned with your long-term goals. When inflation challenges your retirement income, an advisor can help you:

• Minimize taxes on RMDs
• Maintain portfolio balance amid volatility
• Preserve purchasing power for the years ahead

Final Thoughts

Inflation may be beyond your control, but your RMD strategy isn’t. By planning ahead with the guidance of a fiduciary financial advisor, you can make smarter withdrawal decisions, safeguard your retirement income, and stay ahead of inflation’s impact.

 

Global View Capital Management (GVCM) is an affiliate of Global View Capital Advisors (GVCA). GVCM is a SEC Registered Investment Advisory firm headquartered at N14W23833 Stone Ridge Drive, Suite 350, Waukesha, WI 53188-1126. 262.650.1030. Registration as an Investment Advisor does not imply a certain level of skill or training. Ryan Peca is an Investment Adviser Representative (“Adviser”) with GVCM. Additional information can be found at www.adviserinfo.sec.gov Global View Capital Insurance Services (GVCI) is an affiliate of Global View Capital Advisors (GVCA). GVCI services offered through Experior Financial Group, ASH Brokerage, and/or PKS Financial. GVCI is headquartered at N14W23833 Stone Ridge Drive, Suite 350, Waukesha, WI 53188-1126. 262-650-1030. Ryan Peca is an Insurance Agent of GVCI.