Retirees — Stop Selling Stocks at the Bottom to Pay Your RMD
Written & reviewed by Hans Goldstein, Independent Licensed Insurance Producer · NPN 20602398Independently reviewed & last updated 2026-06-08
Last updated: June 8, 2026
The IRS forces you to take Required Minimum Distributions (RMDs) starting at age 73. For a $2M IRA, that's roughly $80,000-$95,000/year mandatory withdrawal. Pull that money from the wrong bucket in a down market year — and you can lose $200K-$400K of retirement wealth over the next 15 years.
This isn't about annuities. It's about sequence-of-returns risk + which bucket you draw from. The honest article + working calculator.
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The 30-second answer
- The problem: RMDs are mandatory. Down markets are inevitable. Withdrawing from equity at the bottom locks in losses you never recover.
- The mechanics: Selling $80K of stocks at -25% means you sold 33% more shares than at fair value. Those shares are gone — they don't participate in the recovery.
- The fix: Carve off 5-7 years of RMDs into a "rate bucket" (MYGA or short-term fixed). When markets crash, withdraw from the rate bucket. Let equities recover.
- Why MYGA over bonds: 2026 MYGA rates at 5.85% beat bond ladder yields + tax-deferred + no duration risk. Bonds in 2022 lost 13% — broke the "safe" assumption.
- Why NOT FIA for this job: FIA caps + surrender periods don't fit a 5-7 year RMD-funding bucket. MYGA is the right tool.
The sequence-of-returns trap (historical S&P 2000-2024)
Two retirees, both $2M IRA at age 73, both withdraw $90K/year. Same total dollars withdrawn. Different SEQUENCES of market returns.
Retiree A — bull market early (2003-2007 returns):
- 2003: +28.7%
- 2004: +10.9%
- 2005: +4.9%
- 2006: +15.8%
- 2007: +5.5%
- End of year 5: $2.4M remaining
Retiree B — bear market early (2000-2002 returns):
- 2000: -9.1%
- 2001: -11.9%
- 2002: -22.1%
- 2003: +28.7%
- 2004: +10.9%
- End of year 5: $1.05M remaining
Same $450K total withdrawn. $1.35M difference in remaining balance.
This is sequence-of-returns risk. It's why "average 7% returns over 30 years" is dangerously misleading for retirees.
The bucket fix — how it actually works
Three-bucket retirement income strategy:
- Bucket 1 — Cash (1-2 years of expenses): Money market, HYSA. For immediate spending.
- Bucket 2 — Rate bucket (5-7 years of RMDs): MYGA(s), short-term bonds. For RMD funding in down market years.
- Bucket 3 — Equity (long-term): Stocks/ETFs. For inflation protection + long-term growth.
The rule: When markets are UP, fund RMDs from equity (Bucket 3). When markets are DOWN, fund RMDs from the rate bucket (Bucket 2). Refill the rate bucket from equity gains in up years.
This single rule protects you from sequence-of-returns risk on the RMD dollars.
Why MYGAs at 5.85% beat bonds + FIAs for this job
vs. Bonds
- 2022 bond crash: -13% on the Bloomberg Aggregate (worst year in 40+ years)
- "Safe" bond ladder was destroyed by rising rates
- MYGAs are rate-locked — immune to interest rate movements during guarantee period
vs. Money Market / HYSA
- HYSAs pay 4-4.5%; MYGAs pay 5.50-6.25% (1.5-1.75 percentage point higher)
- HYSAs are taxed annually; MYGAs are tax-deferred (compound advantage)
vs. FIAs
- FIAs have 7-15 year surrender periods + cap rates that can drop
- Rate bucket needs 5-7 year flexible access — MYGA matches perfectly
- FIA caps renew annually with risk; MYGA rate is locked for term
vs. Stocks
- Stocks are Bucket 3, not Bucket 2
- The whole POINT of the bucket strategy is to NOT pull RMD from stocks during downturns
Three real retiree scenarios
Scenario A — Mark, 73, $1.5M IRA, no buckets
Mark withdraws his $61K RMD from his 60/40 portfolio every year. 2026 hits a -28% bear market. Mark sells $61K of equity at -28% = ~$85K of equity at fair value lost. Recovery doesn't help — those shares are gone. 15-year cost: ~$280K.
Scenario B — Sandra, 73, $1.5M IRA, $400K MYGA bucket
Sandra carves off $400K into MYGAs (5-year @ 5.85% + 7-year @ 5.95%). 2026 bear market hits. Sandra pulls her $61K RMD from MYGA. Equities recover untouched. 15-year cost: $0 from sequence risk; she earns 5.9% on the rate bucket vs. 0% from selling at bottom.
Scenario C — David, 73, $1.5M IRA, $400K MYGA bucket + 90% A-rated carrier
David ladders his MYGA across 3 carriers ($150K Wichita National at 6.25%, $150K F&G at 5.65%, $100K MassMutual at 4.5% for A++ safety) — staying under each state guaranty fund limit. Same protection as Sandra plus carrier diversification. 15-year cost: $0; superior carrier protection.
The vetted MYGA carriers for RMD bucket funding
For RMD bucket funding (5-7 year horizon, A-rated or better):
| Carrier / Product | Rate (Jun 2026) | AM Best | Best for |
|---|---|---|---|
| F&G Guarantee-Platinum 5 | 5.65% | A | A-rated sweet spot |
| F&G Guarantee-Platinum 7 | 5.75% | A | Longer commitment |
| Aspida WealthLock 5 | 5.95% | A− | A− top rate |
| Athene MaxRate 5 | 5.45% | A+ | A+ rated MYGA |
| Wichita National Security 5 | 6.25% | B+ | Max rate (under guaranty fund) |
| MassMutual Stable Voyage 5 | 2.45% | A++ | Max safety (lowest rate) |
| Delaware Life Pinnacle 5 | ~5.65% | A− | Mid-tier alternative |
→ See full live comparison: Best MYGA Rates 2026
The math on a $400K rate bucket
$400K MYGA bucket at average 5.85% for 5 years:
- Year 1 starting: $400,000
- Annual MYGA yield: $23,400 tax-deferred
- After 5 years (no withdrawals): $531,000
Funds 5+ years of RMDs if equity markets crash. Equities recover untouched. Refill bucket in next up year.
When this strategy works (and when it doesn't)
✅ Age 73+ subject to RMDs
✅ IRA balance $500K+
✅ Want to preserve equity for inheritance / late-life spending
✅ Don't need 100% of IRA in liquid equities
❌ Under 73 (no RMDs yet — different planning)
❌ Small IRA ($200K) — the bucket math doesn't justify the MYGA commitment
❌ You actually want to spend down aggressively (no inheritance goal)
❌ Wealthy enough you don't care about $200-400K of variance
Run the calculator
→ RMD Bucket Trap Calculator — see your year-by-year mechanics and 15-year cost projection
Enter your IRA balance, age, and proposed MYGA bucket size. Calculator shows:
- Year-by-year withdrawal mechanics under bear / bull / mixed scenarios
- 15-year cost of pulling from the wrong bucket
- MYGA-bucket strategy alternative
- Carrier match suggestions for your amount
Pressure-test your RMD plan
- "Where will I pull my RMD if the S&P drops 30% next year?"
- "Do I have 5-7 years of RMDs in fixed-rate assets?"
- "Is my fixed bucket actually safe — or did 2022 bonds break that assumption?"
- "Is my IRA over $500K? (smaller IRAs don't need this strategy)"
- "Am I optimizing for total wealth or just spending?"
If your answer to #1 is "from my equity portfolio" — you have sequence risk. The bucket strategy fixes it.
Featured related reading
- Best MYGA Rates 2026 — live ARW rate data
- Annuity vs CD — why MYGA wins for fixed bucket
- MYGA & SPIA Heyday 2026 — why now to lock in rates
- Social Security IS an Annuity — income floor framework
- Annuities and Taxes Explained — RMD tax mechanics
⏳ Renewal rate risk — why FIA caps work like HYSA rates (NOT mortgage rates)
This is the #1 thing buyers misunderstand about fixed indexed annuities, and the single biggest source of "I didn't know it worked that way" regret after year 3.
The mortgage-rate mental model is wrong
When you take out a 30-year fixed mortgage at 6.5%, that rate is locked for the entire term. The bank can't raise it. That's how most buyers assume an FIA cap rate works.
It's not. FIA cap rates work like high-yield savings account rates.
When Marcus or Ally raises their HYSA rate from 4.0% to 4.5%, that's their choice — and they can drop it back to 4.0% the next month. The rate you saw when you opened the account is NOT the rate you keep forever. The bank can change it at any time.
FIA cap rates work the same way:
- The cap you see at purchase applies to the first crediting period only (typically year 1).
- At each anniversary, the carrier can reset the cap within the contractual minimum.
- If interest rates fall or the carrier's option budget tightens, your cap can drop dramatically — sometimes from 9% down to 3-4% over a few years.
Why caps change: the option-budget mechanics
Carriers don't print money to pay your index-linked credit. They take your premium, invest most of it in bonds at prevailing interest rates, and use the bond yield to buy S&P 500 call options that generate the index credit.
- Rates UP → bond yields rise → more option budget → higher caps possible
- Rates DOWN → bond yields fall → less option budget → caps get cut
The 2010-2021 low-rate environment crushed FIA caps across the entire industry. The 2022-2025 rate cycle restored them. Whatever cap you see today is a function of TODAY's interest rate environment — and that environment will change.
The minimum cap floor (the only real guarantee)
Every FIA contract has a minimum guaranteed cap stated in the contract. This is the LOWEST the cap can ever go. Common minimum caps:
- Some contracts: 1% minimum cap (essentially nothing)
- Better contracts: 2-3% minimum cap
- Top-tier products: 4%+ minimum cap
Read the minimum cap before signing. If it's 1%, your worst-case scenario is essentially 0% real returns for 10+ years.
How to evaluate a carrier's renewal practices BEFORE buying
The single best protection: ask the agent for the carrier's in-force renewal-rate history for the product you're being quoted. A carrier that's maintained competitive caps on existing contracts over 5+ years is much more trustworthy than one with no history (or worse, a history of cap cuts).
Carriers with the most consistent in-force renewal track records (industry consensus as of 2026): Athene, Allianz, Sammons (North American/Midland), American Equity, and Nationwide. These carriers have published renewal-rate histories that survive scrutiny.
Carriers without published renewal-rate histories OR with a history of cutting caps post-sale should be evaluated carefully — especially if the cap they're showing you today is near the top of the market.
The single most important questions to ask
- "What's the minimum guaranteed cap in this contract?"
- "Can you show me this product's in-force renewal-rate history for the last 5 years?"
- "What's the current cap on in-force contracts purchased in 2020, 2018, and 2015?"
- "If the cap drops to the minimum, what's my realistic annual credited return?"
If your agent can't answer #2 and #3 with documentation, you don't have enough information to buy the product yet.
⏳ Renewal rate risk — why FIA caps work like HYSA rates (NOT mortgage rates)
This is the #1 thing buyers misunderstand about fixed indexed annuities, and the single biggest source of "I didn't know it worked that way" regret after year 3.
The mortgage-rate mental model is wrong
When you take out a 30-year fixed mortgage at 6.5%, that rate is locked for the entire term. The bank can't raise it. That's how most buyers assume an FIA cap rate works.
It's not. FIA cap rates work like high-yield savings account rates.
When Marcus or Ally raises their HYSA rate from 4.0% to 4.5%, that's their choice — and they can drop it back to 4.0% the next month. The rate you saw when you opened the account is NOT the rate you keep forever. The bank can change it at any time.
FIA cap rates work the same way:
- The cap you see at purchase applies to the first crediting period only (typically year 1).
- At each anniversary, the carrier can reset the cap within the contractual minimum.
- If interest rates fall or the carrier's option budget tightens, your cap can drop dramatically — sometimes from 9% down to 3-4% over a few years.
Why caps change: the option-budget mechanics
Carriers don't print money to pay your index-linked credit. They take your premium, invest most of it in bonds at prevailing interest rates, and use the bond yield to buy S&P 500 call options that generate the index credit.
- Rates UP → bond yields rise → more option budget → higher caps possible
- Rates DOWN → bond yields fall → less option budget → caps get cut
The 2010-2021 low-rate environment crushed FIA caps across the entire industry. The 2022-2025 rate cycle restored them. Whatever cap you see today is a function of TODAY's interest rate environment — and that environment will change.
The minimum cap floor (the only real guarantee)
Every FIA contract has a minimum guaranteed cap stated in the contract. This is the LOWEST the cap can ever go. Common minimum caps:
- Some contracts: 1% minimum cap (essentially nothing)
- Better contracts: 2-3% minimum cap
- Top-tier products: 4%+ minimum cap
Read the minimum cap before signing. If it's 1%, your worst-case scenario is essentially 0% real returns for 10+ years.
How to evaluate a carrier's renewal practices BEFORE buying
The single best protection: ask the agent for the carrier's in-force renewal-rate history for the product you're being quoted. A carrier that's maintained competitive caps on existing contracts over 5+ years is much more trustworthy than one with no history (or worse, a history of cap cuts).
Carriers with the most consistent in-force renewal track records (industry consensus as of 2026): Athene, Allianz, Sammons (North American/Midland), American Equity, and Nationwide. These carriers have published renewal-rate histories that survive scrutiny.
Carriers without published renewal-rate histories OR with a history of cutting caps post-sale should be evaluated carefully — especially if the cap they're showing you today is near the top of the market.
The single most important questions to ask
- "What's the minimum guaranteed cap in this contract?"
- "Can you show me this product's in-force renewal-rate history for the last 5 years?"
- "What's the current cap on in-force contracts purchased in 2020, 2018, and 2015?"
- "If the cap drops to the minimum, what's my realistic annual credited return?"
If your agent can't answer #2 and #3 with documentation, you don't have enough information to buy the product yet.
Explain it like I'm 12 — quick summary
Annuities are insurance contracts that exchange a premium (lump sum or installments) for one of three benefit structures:
- Lifetime income (SPIA — pay once, get monthly checks for life)
- Tax-deferred growth with downside protection (FIA — market-linked credits with caps + 0% floor)
- Fixed rate over a term (MYGA — like a CD on steroids)
The carrier funds these benefits through bond portfolio yields + (for FIAs) option budgets used to buy market-linked credits.
The trade-off across all annuity products: certainty in exchange for liquidity and growth potential. SPIA = max certainty (income guaranteed for life) at cost of principal access. FIA = downside protection at cost of growth ceiling. MYGA = rate certainty at cost of term lock-up.
Quick FAQ
Q: Are annuities ever "good investments"?
A: Yes — when used for the specific purpose of income certainty, downside protection, or rate certainty. Bad when forced into a hybrid agenda (e.g., SPIA sold for "growth").
Q: What's the difference between immediate and deferred annuities?
A: Immediate (SPIA) = income starts within 12 months of purchase. Deferred = income or accumulation over years before payouts begin.
Q: Who regulates annuities?
A: State insurance commissioners. (RILAs are also FINRA-regulated as securities.)
Q: What's the state guaranty fund limit?
A: Typically $250,000-$300,000 per owner per carrier (varies by state). Split large purchases across multiple carriers to stay within coverage on each half.
Q: How do I compare annuities side-by-side?
A: Look at: carrier rating (AM Best, S&P, Moody's, Fitch, Weiss, KBRA composite), Goldstein Complexity Index, renewal-rate integrity, customer service, and the specific structure for YOUR use case.
Q: When should I get a second opinion?
A: Before signing any annuity over $50,000. Independent review costs nothing and can save thousands.
Explain it like I'm 12 — quick summary
Annuities are insurance contracts that exchange a premium (lump sum or installments) for one of three benefit structures:
- Lifetime income (SPIA — pay once, get monthly checks for life)
- Tax-deferred growth with downside protection (FIA — market-linked credits with caps + 0% floor)
- Fixed rate over a term (MYGA — like a CD on steroids)
The carrier funds these benefits through bond portfolio yields + (for FIAs) option budgets used to buy market-linked credits.
The trade-off across all annuity products: certainty in exchange for liquidity and growth potential. SPIA = max certainty (income guaranteed for life) at cost of principal access. FIA = downside protection at cost of growth ceiling. MYGA = rate certainty at cost of term lock-up.
Quick FAQ
Q: Are annuities ever "good investments"?
A: Yes — when used for the specific purpose of income certainty, downside protection, or rate certainty. Bad when forced into a hybrid agenda (e.g., SPIA sold for "growth").
Q: What's the difference between immediate and deferred annuities?
A: Immediate (SPIA) = income starts within 12 months of purchase. Deferred = income or accumulation over years before payouts begin.
Q: Who regulates annuities?
A: State insurance commissioners. (RILAs are also FINRA-regulated as securities.)
Q: What's the state guaranty fund limit?
A: Typically $250,000-$300,000 per owner per carrier (varies by state). Split large purchases across multiple carriers to stay within coverage on each half.
Q: How do I compare annuities side-by-side?
A: Look at: carrier rating (AM Best, S&P, Moody's, Fitch, Weiss, KBRA composite), Goldstein Complexity Index, renewal-rate integrity, customer service, and the specific structure for YOUR use case.
Q: When should I get a second opinion?
A: Before signing any annuity over $50,000. Independent review costs nothing and can save thousands.
Sources
- S&P 500 historical returns 2000-2024 (Yahoo Finance)
- Bloomberg US Aggregate Bond Index 2022 returns
- IRS Uniform Lifetime Table (RMD calculation)
- Annuity Rate Watch (ARW) MYGA data, June 2026
- Sequence-of-returns risk research (Pfau, Kitces)
📩 Get a second opinion before you sign — this is a big decision
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Fixed indexed annuities are committed for 7-15 years. Cap rates renew annually and can drop. Income riders have separate benefit bases that aren't cash. Get an independent review before you commit your retirement savings to a multi-year contract.
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📞 Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed insurance producer appointed with multiple A-rated carriers
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Disclosure
This review reflects publicly available product materials and approximate rates as of the date stated above. Annuity rates, caps, participation rates, payout factors, crediting methods, and long-term care benefit structures change frequently — typically monthly. Always confirm current values against the most recent carrier disclosure document and the actual contract before purchasing. This article is general information for educational purposes; it is not a personalized recommendation, solicitation, or offer of any specific product. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated carriers across the annuity and long-term care insurance market; the producer's specific appointment status with the carrier discussed in this review may vary, and this review is not an endorsement or representation of carrier appointment. No compensation has been received from any carrier in connection with the publication of this review. Always read the actual contract and consult a licensed advisor before purchasing any annuity or long-term care insurance product. Past index performance does not predict future credited interest. Annuities and hybrid life+LTC policies are long-term contracts with surrender charges; they are not suitable for funds you may need before the end of the surrender period. AM Best ratings and tax treatment are subject to change. Tax discussion of IRC §7702B, §1035, and the Pension Protection Act of 2006 reflects law as of 2026 and is subject to change.
🧮 Goldstein Complexity Index
A core part of every Goldstein review. The more complex an annuity, the worse the rating in this dimension — because complexity is where buyers get burned (confusing riders, fee structures hidden in plain sight, surrender penalties that surprise people, separate "benefit bases" they thought were cash). Simple products (SPIAs, MYGAs) score low; products with stacked bonuses + income riders + MVA + multiple crediting strategies score high.
This product's score: 13/100 — Grade A+ (Transparent)
Easy to understand. Few moving parts. The buyer can fully explain the product to a friend after one read of the contract.
Score breakdown
| Dimension | Score (1–10) | What this measures |
|---|---|---|
| Riders | 3/10 | Number of optional/required riders (income, death benefit, LTC, etc.). More riders = more fees + more confusion. |
| Crediting strategies | 2/10 | Number of index-linked strategies (cap, spread, participation rate, step rate, volatility-controlled indices). More options = harder to understand. |
| Surrender complexity | 3/10 | Length of surrender period + MVA + bonus recapture interaction. Longer + MVA + recapture = more confusion. |
| Benefit-base separation | 2/10 | If the product has a separate "PIV" or income-base that is NOT cash but feels like cash. This is the single biggest source of buyer confusion in the industry. |
| Bonus structure | 1/10 | Premium bonus with recapture schedule. The bonus is real, but the recapture is complex. |
How to read this
- A+/A (0–40): You can understand what you bought. Pure accumulation FIA, MYGA, or SPIA. Low risk of mis-selling.
- B (41–60): You need to read the contract carefully and have a second-opinion review before signing. Income riders add the most confusion.
- C (61–80): Many buyers don't fully understand what they own. Common mis-selling: "bonus" sold as cash, "benefit base" sold as account value, surrender charges undisclosed.
- D (81–100): Demands an independent producer second opinion before signing. The product may still be right for you — but the chance you'll later say "I didn't know it worked that way" is very high.
Why complexity matters more than people think: Carriers don't get sued for complexity. Agents don't get sued for it either (in most states). But buyers regret it constantly. The annuity that wins your money in year one and confuses you for the next 14 is worse than a simpler product that you understood perfectly. Simple ≠ inferior. Simple = audit-able.
🧮 Goldstein Complexity Index
A core part of every Goldstein review. The more complex an annuity, the worse the rating in this dimension — because complexity is where buyers get burned (confusing riders, fee structures hidden in plain sight, surrender penalties that surprise people, separate "benefit bases" they thought were cash). Simple products (SPIAs, MYGAs) score low; products with stacked bonuses + income riders + MVA + multiple crediting strategies score high.
This product's score: 13/100 — Grade A+ (Transparent)
Easy to understand. Few moving parts. The buyer can fully explain the product to a friend after one read of the contract.
Score breakdown
| Dimension | Score (1–10) | What this measures |
|---|---|---|
| Riders | 3/10 | Number of optional/required riders (income, death benefit, LTC, etc.). More riders = more fees + more confusion. |
| Crediting strategies | 2/10 | Number of index-linked strategies (cap, spread, participation rate, step rate, volatility-controlled indices). More options = harder to understand. |
| Surrender complexity | 3/10 | Length of surrender period + MVA + bonus recapture interaction. Longer + MVA + recapture = more confusion. |
| Benefit-base separation | 2/10 | If the product has a separate "PIV" or income-base that is NOT cash but feels like cash. This is the single biggest source of buyer confusion in the industry. |
| Bonus structure | 1/10 | Premium bonus with recapture schedule. The bonus is real, but the recapture is complex. |
How to read this
- A+/A (0–40): You can understand what you bought. Pure accumulation FIA, MYGA, or SPIA. Low risk of mis-selling.
- B (41–60): You need to read the contract carefully and have a second-opinion review before signing. Income riders add the most confusion.
- C (61–80): Many buyers don't fully understand what they own. Common mis-selling: "bonus" sold as cash, "benefit base" sold as account value, surrender charges undisclosed.
- D (81–100): Demands an independent producer second opinion before signing. The product may still be right for you — but the chance you'll later say "I didn't know it worked that way" is very high.
Why complexity matters more than people think: Carriers don't get sued for complexity. Agents don't get sued for it either (in most states). But buyers regret it constantly. The annuity that wins your money in year one and confuses you for the next 14 is worse than a simpler product that you understood perfectly. Simple ≠ inferior. Simple = audit-able.