Before the end of the year, everyone age 72 or older will have to take required minimum distributions (RMDs) from their tax-advantaged retirement accounts—401(k)s, IRAs, etc. These distributions count as taxable income.

But this year’s mandatory withdrawal may feel especially painful, since the required distribution amounts are based on account values at the end of the previous year, when market values were some 20% higher than they are today. That means retirees will have to take out a larger chunk of their nest eggs than usual.

There are, however, a few legal work-arounds to reduce the sting of selling in a down market.

In-kind Distributions
Rather than take distributions in cash, clients can take an equivalent amount of assets and reinvest them in a taxable account. It’s called an in-kind distribution. “This allows the client to not sell anything, just move some stock from one account to another,” said Al Meadows, a senior wealth advisor at Gratus Capital in Atlanta.

The tactic is essentially the same as selling enough shares of an IRA or 401(k) to meet the RMD, and then buying the shares back via a separate brokerage account. “There are no tax advantages [to this method],” Meadows acknowledged, but there is a psychological benefit. “It can allow a client to feel good about not selling while the market is down,” he said.

When clients have to sell shares at depressed values, they often feel as if they’re chopping down a beloved tree when it’s wilting, said Lou Barberini, a financial advisor in San Francisco. He encourages them to think of it instead as transplanting the tree to a new orchard.

Roth Conversions
Barberini also recommends clients convert as much of their traditional IRA assets to a Roth IRA as they can, to reduce the RMD burden. In Roth IRAs, the assets can grow tax-free. After the first five years, they can be withdrawn tax-free, too. Only the conversion itself is taxed. What’s more, Roth IRAs are never subject to required minimum distributions.

Roth conversions do not satisfy the RMD requirement, however. Clients will still have to take the required minimum distribution for the current tax year before they can convert to a Roth IRA. But they can use all or part of the RMD funds to pay the taxes due from the conversion.

“Transferring to a Roth IRA from a traditional [retirement account] is superior to transferring from a traditional [retirement account] to a brokerage account,” said Barberini. “The Roth is tax-free forever.”

Life Insurance And Qualified Charitable Distributions
Another option for clients is to use their RMD money to fund a life insurance policy. This way, their money can help an heir. Depending on the policy, the client can also borrow against the insurance later or even use it to pay for long-term care in the future.

Alternatively, the required distributions could go to fund a client’s favorite charity, said Megan Slatter, a wealth advisor at Crewe Advisors in Salt Lake City. Charitable donations made directly from an IRA are called qualified charitable distributions (QCDs)—and such distributions do not count as taxable income, which the distribution otherwise would. An individual can donate up to $100,000 a year this way (but cannot also claim a charitable contributions deduction on that donation to reduce taxable income).

“QCDs are a wonderful strategy to further your philanthropic goals, satisfy your annual RMD requirement, and reduce your tax liability,” said Slatter. “The donation check must be issued directly from your IRA custodian to the qualified charity to satisfy all or part of someone’s annual RMD requirements.”

Balancing RMDs With Careful Tax Planning
When you use careful tax planning, your required minimum distributions can be used in conjunction with tax-loss harvesting strategies elsewhere.

Melissa Ciotoli, a managing director and senior wealth advisor at GYL Financial Synergies in Westport, Conn., said she’s been using tax-loss harvesting for clients’ taxable accounts. This involves selling underperforming or money-losing assets, which are considered capital losses. These losses offset taxable capital gains from other asset sales—and in some cases can even reduce ordinary personal income taxes.

“Up to $3,000 of capital losses that are not otherwise offset by capital gains can be used against ordinary income each year,” said Ciotoli, “so that can help many people.”

Selling Assets That Aren’t Market-Based
Still other advisors recommend taking required minimum distributions from assets other than stocks—for instance, real estate that’s owned within a retirement account.

But this can get tricky. You must consider whether the property throws off enough rent to fund the RMD. If not, you may have to sell the property to generate sufficient cash.

“It is not uncommon to find your IRA increasing in value due to property appreciation, while getting low on cash [from rental income], leaving you unable to pay the RMD,” said Slatter.

An Opportunity To Rebalance
The regulations for required minimum distributions can be complicated and maddening. But there is some leeway. “If you have multiple IRAs, you can satisfy your total RMD from one IRA or a combination of IRAs,” said Slatter, adding that this is not the case for 401(k)s or other qualified retirement plans, only IRAs.

Given that flexibility, the required distributions may be a good reason for you to assess and tweak your portfolio. “Use this as an opportunity to sell overweight investments or asset classes to rebalance your overall investment allocation,” she said.

Clarification: The original draft of this article omitted some important nuances about the use of qualified charitable distributions and the timing of Roth conversions.