RMDs: Are they Portfolio Killers?

October 14, 2025

When it comes time to take Required Minimum Distributions (RMDs) from your retirement accounts, it’s common to worry about how those withdrawals might impact your long-term savings. After all, taking money out of your nest egg each year can feel counterintuitive when your goal is to make your assets last.

But here’s some good news: RMDs don’t have to derail your retirement plan. In fact, based on nearly a century of market data, even portfolios subject to RMDs can continue to grow over time.

What Are RMDs—and When Do They Apply?

RMDs are mandatory annual withdrawals the IRS requires once you reach age 73 (for most retirees today). They apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, and employer-sponsored retirement plans like 401(k), 403(b), and 457(b) plans.

At age 73, the first-year withdrawal rate is 3.77%. So, if your portfolio were worth $1 million, you’d be required to withdraw $37,700 that year. The percentage increases gradually over time, reflecting your life expectancy.

Studying 75 Years of Market History

To test how RMDs affect portfolio performance, we analyzed a $1 million retirement portfolio over 75 different 25-year periods from 1926 through 2024.

Each simulated retiree began taking RMDs at age 73 and continued for 25 years, until age 97. Six portfolios were tested—ranging from 100% bonds to 100% equities—and each was rebalanced annually to maintain its allocation.

Investment returns were based on long-term, historical benchmarks such as the S&P 500 for large-cap stocks, the Russell 2000 for small-cap stocks, and the Bloomberg Aggregate Bond Index for bonds. Each portfolio also included an assumed 1% annual expense to represent fund costs and advisory fees.

What the Data Shows

1. Conservative Portfolios Can Hold Their Ground

An ultra-conservative portfolio (70% bonds, 30% cash) managed to end with a higher balance than it started for roughly one out of every five retirees. The average ending balance was $578,618—despite taking 25 years of required withdrawals.

That said, returns were modest. Over the 99-year period, the portfolio’s average annualized return was 3.5% with relatively low volatility (standard deviation of 4.55%).

2. The Classic 60/40 Portfolio Shines

A balanced portfolio with 60% equities and 40% fixed income produced far stronger outcomes. More than 80% of retirees ended the 25-year period with more than their starting balance—despite taking annual RMDs. The average ending balance: $1.62 million.

Over the long term, the 60/40 mix returned 7.95% annually, with a standard deviation of 13.5%. The average annual RMD withdrawal was about $114,000.

3. 100% Equity Portfolios Lead in Growth—But at a Cost

Retirees with all-equity portfolios fared even better in terms of growth—ending with an average balance near $3 million. Nearly 95% of these portfolios grew despite RMDs.

However, that growth came with steep volatility. The worst one-year loss approached 47%, and few investors could comfortably stay the course through such sharp downturns. The historical average annual return was 9.9%, with a standard deviation of 22.3%.

The Power of Percentage-Based Withdrawals

The key takeaway is that RMDs themselves don’t destroy portfolios—behavior does. Because RMDs are percentage-based, the amount you withdraw adjusts naturally with market performance. When your portfolio declines in value, your RMD (calculated as a percentage of the balance) declines too, giving your portfolio breathing room to recover.

This built-in flexibility acts as a safeguard—similar to the popular “4% rule” for sustainable withdrawals. In every scenario we modeled, the portfolios survived the full 25-year period, regardless of allocation.

Finding the Sweet Spot

Our analysis shows that increasing equity exposure improves long-term outcomes—up to a point. For most retirees, a balanced mix such as 60% stocks and 40% bonds offers the best combination of growth potential, income stability, and risk management.

Yes, the trade-off is greater volatility than a fully conservative portfolio, but the long-term benefits can be substantial. Conversely, going all-in on equities may push beyond the comfort zone of most investors, especially during deep market corrections.

The Bottom Line

RMDs are not the enemy of retirement success. With the right investment mix—and the discipline to stay invested through market ups and downs—your portfolio can continue to grow even as you take required withdrawals each year.

As always, the optimal allocation depends on your goals, income needs, and risk tolerance. If you’re nearing RMD age or already taking withdrawals, it may be a good time to review your portfolio strategy to ensure it’s still aligned with your long-term plan.

Sources:

Taylor, Debra. “Let's Talk About the RMD." www.horsesmouth.com. 9 Oct. 2025. https://www.horsesmouth.com/lets-talk-about-the-rmd. Accessed on 9 Oct. 2025.

Disclosure:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.