The Surprising but Totally Legal Way You Can Avoid RMDs in 2026

Retirees age 73 and older are generally required to take RMDs from traditional retirement plans, but those still employed and owning less than 5% of their employer can defer RMDs from that employer's plan (the exception does not apply to IRAs). The article stresses the 25% penalty for failing to withdraw required amounts and suggests direct charitable transfers or using RMD proceeds for consumption or home improvements as tax-efficient or practical options, implications that may modestly influence retirees' tax liabilities and household spending.

Analysis

Market structure: The RMD exception for active employees shifts marginal flows from IRA custodians toward in‑plan balance retention, benefitting 401(k) recordkeepers and payroll/plan administration (ADP, FIS, SSNC) and reducing near‑term forced selling into equities. Aggregate forced RMD flows are likely in the "low tens of billions" annually; a material portion concentrated in Dec creates seasonal sell pressure that may ease if more retirees stay on payroll. Exchanges (NDAQ) see neutral to small positive volume effects; large asset managers (BLK, TROW) that rely on IRA rollovers are relative losers.

Risk assessment: Tail risks include legislative change (Congress could alter RMD age/rules within 6–18 months) or an IRS technical correction that widens tax planning activity; a steep market downturn could accelerate IRA rollovers and negate the in‑plan benefit. Immediate (days) impact is minimal; expect measurable effects over 1–6 months as tax‑planning season ramps and across 12–36 months as labor participation of 65+ trends. Hidden dependency: employment rates for 65+ (BLS monthly) and corporate plan design (in‑service distribution rules) determine magnitude.

Trade implications: Prefer durable exposure to plan administrators/recordkeepers over pure asset managers: asymmetric upside from fee retention and recurring payroll volumes. Hedge market seasonality into year‑end (Oct–Dec) when RMDs concentrate. Monitor IRS/govt announcements 0–90 days as catalysts that can flip flows quickly.

Contrarian angle: Consensus underestimates operational stickiness of assets staying in employer plans — this is structural, not cyclical, if older workers keep working. The market may be underpricing SSNC/FIS exposure and overpricing large‑cap asset managers; unintended consequence: lower IRA liquidity could concentrate selling into fewer liquid large caps, supporting mega‑cap outperformance.

Key Decisions for Investors

• Establish a 2–3% long position in ADP (ADP) with a 6–12 month horizon to capture incremental plan admin and payroll fee accruals as more 65+ employees remain on payroll; target +15% upside, set a 10% stop‑loss.
• Initiate a 2% long in SS&C Technologies (SSNC) or FIS (FIS) as a paired exposure to recordkeeping/technology revenue retention; hold 12–24 months and scale in on dips of 8–12%.
• Trim 1–2% exposure to large asset managers (e.g., BLK) and replace with the above plan admin longs (pair trade: long ADP 2%, short BLK 1%) to exploit relative flow weakness from fewer IRA rollovers over next 6–18 months.
• Buy a protective SPY Dec (3 months) put spread sized at 0.5–1% of portfolio notional (buy 2–3% OTM put, sell 6–8% OTM put) to hedge concentrated equity exposure against year‑end RMD selling or a tax‑season market repricing.
• Monitor: over the next 60–90 days track (a) Congressional tax/RMD proposals, (b) BLS employment for 65+ (monthly), and (c) plan sponsor in‑service distribution policy changes; increase/decrease positions by ±50% if two of three indicators move strongly (legislative change OR employment delta >2% OR mass plan policy shifts).