Your RMD Doesn’t Have to Be Cash: He Moved the Shares Themselves Out of the IRA, Paid the Exact Same Tax and Never Had to Sell at the Bottom
Most retirees assume a forced IRA withdrawal means selling shares whether they want to or not, but a little-known IRS rule lets you satisfy the requirement without liquidating a single position, even in a falling market.
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If you own a traditional IRA and you’ve reached the age when the government forces withdrawals, here’s a rule almost nobody uses: your required minimum distribution (RMD) doesn’t have to leave as cash. You can order the custodian to move the shares themselves, at fair market value, into a taxable brokerage account. The IRS calls this an in-kind distribution. It satisfies the RMD with the identical tax bill a cash withdrawal would generate, and you never have to sell into a weak market.
How an In-Kind Transfer Satisfies Your RMD
An RMD is the minimum you’re forced to pull from a pretax retirement account each year once you hit the trigger age. The dollar amount is set by dividing your account balance on the last business day of the prior year by an IRS life-expectancy factor. If stocks have dropped since then, a cash RMD forces you to sell into the decline and permanently exit those shares.
Move the shares in kind and your investment position is unchanged. Your custodian transfers a specified number of shares of, say, Apple (NASDAQ:AAPL | AAPL Price Prediction) or Microsoft (NASDAQ:MSFT) from the IRA to your taxable account. The value on the transfer date counts as the distribution. Dividends keep flowing, and any recovery accrues to you.
Rule Chapter and Verse
RMDs are governed by Internal Revenue Code §401(a)(9) and §408(a)(6), with mechanics detailed in IRS Publication 590-B. The SECURE 2.0 Act of 2022 raised the starting age to 73, rising to 75 in 2033. Distributions must be taken by December 31 each year, with your first RMD allowed as late as April 1 of the year after you turn 73. Publication 590-B explicitly permits property distributions valued at fair market value on the date of transfer. A larger pretax balance means a larger forced withdrawal, and the bill lands hardest in year one (we mapped how to shrink that first-year tax bomb years before RMDs begin in a free guide here).
A Down-Market Illustration
Assume your 2026 RMD is $40,000, calculated off your Dec. 31, 2025 IRA balance, and by September the market is well off its highs. You direct your custodian to move Apple shares priced at $319.97 and Microsoft shares priced at $499.70 (both as of Sept. 4, 2026), totaling roughly $40,000 in fair market value, into your brokerage account. You owe ordinary income tax on that $40,000, identical to what a cash RMD would trigger. The shares remain yours, still collecting Apple’s $0.27 quarterly dividend and Microsoft’s $0.91 quarterly dividend.
Basis and Holding Period Reset
A couple of tax rules drive how this plays out. First, the value you transfer is treated as ordinary income and taxed at your marginal rate, so don’t expect any tax savings here. This move is really about timing the market, not cutting your tax bill. Second, the shares you receive get a new cost basis equal to the fair market value on the day of the transfer, and your holding period resets from that date. If you hold them for more than a year, any gains will qualify for the lower long-term capital gains rate, which makes a meaningful difference for most retirees.
When to Skip It
If you need the RMD cash to live on, selling is unavoidable. If you’re charitably inclined, a qualified charitable distribution (QCD) sent straight from the IRA to a qualifying nonprofit is usually better: the income never touches your adjusted gross income and therefore avoids pushing you into a higher Medicare bracket. In 2026, Medicare IRMAA surcharges begin at modified AGI above $109,000 for single filers and $218,000 for joint filers. QCDs are available starting at age 70½.
Traps That Cost People Money
Withholding is the first trap you need to watch for, as the IRS normally takes taxes out of IRA distributions, but when you transfer shares in kind, there is no cash to withhold. You have two choices. Either waive withholding and cover the tax bill yourself through estimated payments, or leave some cash inside the IRA so the custodian can withhold against it.
Valuation is the second issue. The custodian uses the fair market value on the execution date, so you cannot hit your RMD number to the exact dollar in advance. Most people end up transferring a little more than needed, or they add a small cash top-up to cover the difference.
Miss the December 31 deadline entirely, and SECURE 2.0 hits you with a 25% excise tax on the shortfall, though that drops to 10% if you correct it within the statutory correction window. The smart move is to start early in the year, confirm your custodian supports in-kind transfers, decide on your withholding approach, and choose the holding with the strongest recovery potential to move.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
