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11 Strategies – What To Do With Required Minimum Distributions Withdrawals You Don’t Need?

I Don't Need My RMDS For Living Expenses

You’ve spent your entire life working. You’ve put money aside in accounts for retirement. You’ve officially reached your golden years. You’ve achieved the mandatory commencement date RBD when you reach age 72.

It’s time to start taking required minimum distributions RMDs from your Traditional IRA or other qualified retirement accounts now. What to do with RMDs?

What if you don’t need the additional income or money for basic living expenses? And you’re wondering, “What should I do with RMDs?” Especially since minimum distributions requirements count as ordinary taxable income (read my earlier article about RMD Taxable Income). You saved with pre-tax qualified retirement account, and would prefer not to have to pay tax on the amount of your RMD. Especially if you don’t need the income.

You may have nosy family members, but Uncle Sam is not interested in what you are doing with your RMD. You can put it towards living expenses, discretionary expenses, a new savings account, stock market investments, or giving money to relatives or a good cause. Your options are nearly infinite. As long as you take the required minimum distribution RMDs from your retirement account.

As we approach retirement, one of the key financial decisions we must make is how to best withdraw money from our retirement accounts. If we are not careful, we can face significant tax penalties. There are a number of strategies we can use to minimize the taxes we pay on our retirement account withdrawals.

One option is to take only the required minimum distributions (RMDs) from our accounts. Another option is to withdraw funds from our accounts over a period of years, rather than all at once. We can also use some of the money we withdraw from our retirement accounts to pay for expenses, such as healthcare or a new roof for our home.

And, if we have a charitable inclination, we can use some of our retirement account withdrawals to make charitable donations. The key is to carefully consider all of our options and to consult with a financial advisor to ensure that we are making the best choices for our individual situation.

If you don’t need the money, there are a few things you can do with your RMDs.

What To Do With RMDs That You Don’t Need

If you planned enough ahead, you may have expected that you would not need the RMD income. If so, you may have elected to take your Social Security Income earlier rather than delay it. This would lower your Social Security Income later in life, thus increasing your need for your RMD income.

But what if you didn’t plan ahead?

  • Do you have any normal, basics expenses that you could plan ahead to pay?
  • Can you pay some of your larger amounts for living expenses in advance? Real estate taxes? Homeowners Insurance?
  • Perhaps you can buy long term care insurance? Transfer the high cost of health care to an insurance company with income that you don’t need?
  • It may not be a fun topic, but perhaps you can pre pay your funeral and burial expenses?
  • Do you have any debts still such as a car payment or mortgage? If so, pay those down

Basically, any living expenses that we can see and plan for, it may make sense to use your excess RMD to pay now.

Michael. These ideas are all well and good. But the point is, I want to know what to do with RMDs I don’t need. And I don’t want to pay ordinary income tax on the RMD withdrawal.

Well, you HAVE to take your RMDs and pay taxes. Because if you don’t withdraw your RMD, there is an IRS penalty of 50% (read my earlier article about the 50% RMD Penalty). So what can you do?

Here is the good news. You still have some options

But what can you do if your RMDs are beyond your living expense needs? First off, congratulations. Secondly, let’s look at some more creative ideas.

3 Immediate Options For RMDs That You Don’t Need For Living Expenses

Build Your Emergency Fund

The first thought is to set aside some of your extra RMDs into an emergency fund.

You’ve finally reached retirement age. After years of working hard, you can now enjoy your golden years stress-free, right? Not quite. Even if you have a comfortable retirement income, unexpected expenses can crop up, and they can be a real burden if you don’t have an rainy day fund to cover them.

That’s why it’s a good idea to have an emergency fund, even in retirement. An emergency fund is a stash of cash that you can tap into in case of an unexpected expense, like a medical bill or a car repair. Ideally, your emergency fund should have enough money to cover three to six months of current expenses.

Whatever method you choose, the important thing is to start building up your emergency fund now so that you’re prepared for whatever retirement throws your way.

If you already have a large enough emergency fund, let’s move on.

Pay Down Debt

A second option is to use the money to pay down debt.

Most people want to retire with as little debt as possible. After all, who wants to worry about money during their golden years? But sometimes, carrying debt into retirement is unavoidable.

In fact, according to a recent surveys, more than half of Americans aged 60 and over have debt, including mortgages, credit cards, student loans, and car loans. Paying off debt in retirement is the perfect way to use excess RMDs.

Complete Special Projects

Do you have any special projects, or dreams that you have put off? Extension of the home, a family vacation with the kids and grandkids, or helping to pay for the grandkids college education?

Making the most of your retirement can mean different things to different people. For some, it might mean taking that long-awaited trip around the world. For others, it might mean finally getting around to fixing up the house. No matter what your retirement dreams may be, one thing is for sure: you’ll need to carefully consider how to make the most of your retirement income.

Whatever you choose to do with your RMDs, make sure you carefully analyze your alternatives and make the best decision possible for your financial position.

6 More Strategies For RMDs That You Don’t Need For Living Expenses

You have worked your whole life.  You have saved up assets for retirement.  And now you are enjoying your golden years.  You have now that you have reached the required beginning date RBD of age 72,.

It’s time to start taking required minimum annual distributions RMDs from your Traditional IRA or other types of retirement accounts.

But what if you don’t need the extra income stream for your living expenses?  And you are asking yourself “What to do with RMDs?

There are a few things you can do with your RMDs if you don’t need the money. 

I get asked all the time, Can I reinvest my RMD?

Reinvest RMDs into Tax Free income

Yes you can, just not back into your retirement account. But there is nothing stopping you from reinvesting your RMD back into the markets. Consider investing in equities and bonds that are suitable for your risk tolerance and tax bracket.

Purchasing municipal bonds or bond funds, for example, can provide you with additional investment income that is normally tax-free on both the federal and state and local levels. Exchange-traded funds (ETFs) are also a tax-efficient strategy to increase your savings.

Reward Yourself

Do something nice for yourself. You’ve earned a splurge if your essential costs are covered and your debt is paid down. Plan a trip to an exotic location you’ve never visited, buy the convertible you’ve always wanted, or acquire a magnificent piece of art you’ve liked for a long time. Reward yourself – you deserve it.

After all, why else did you accumulate all these assets? Spend some of that cash and reward yourself! It is one of the most popular options to use excess RMDs for – the government is literally telling you that you saved too much money. You have done such a wonderful job with your financial planning and building your nest egg – go enjoy it.

Invest in the FutureCollege Savings For a Beneficiary

Studies show a college education greatly increases the future annual income of a child. So why not pass along your legacy for next 60+ years? If you have to take an automatic distribution and aren’t sure what to do with RMDs, think about putting it to work for the future generation. Help pay for a grandchild’s current educational expenses – we all know college expenses are a struggle for the younger generation. This is a great way to turn your income into investments into the future generation.

New RMD Tables

529 College Savings Plan

Perhaps your grandchildren are not yet in college, but you would like to help them save for their future college planning? Donate your RMD to a 529 college savings plan for one or more of your grandchildren. The money in a 529 account grows tax-free, and annual withdrawals are tax-free as long as they are used for educational costs.

With RMDs, you pay taxes on withdrawals, and if you put them into another taxable account – you will have to pay additional taxes on them again. There is no tax benefit to you to do this.

When money is put into a 529 plan, it grows tax-deferred and can be withdrawn tax-free when used for education expenses. You can place your RMD into a “grandparent 529” account, which is an account that you own and in which the student is the beneficiary. It may be more friendly from a financial aid calculation on income limits and income requirements, than if it was owned by the parents.

Read this article I wrote to learn more about 529 plans or this one for 529 FAQs

Roth IRA ConversionA Retirement Boost

Can’t I put my RMD into a Roth IRA?I” Do you still have other earned income? If so, and you are eligible to contribute to a Roth IRA, absolutely. Putting your RMD into a Roth IRA is an outstanding idea! But you have to be sure you are eligible from an income standpoint before putting your RMD into a Roth IRA.

An alternative to a contributory Roth IRA is to consider converting all or part of your retirement account balance into a Roth IRA. The downside of a Roth Conversion is that you would owe income taxes on the portion of the Individual Retirement Account that you converted.

The advantage of the Roth conversion plan is that the portion in your Roth IRA will not be subject to RMDs moving forward. If you don’t need RMDs for daily expenses or essential expenses – you will have less of an RMD being forced out each year.

Use Your RMDs to Pay Taxes On Smaller Roth Conversions

This strategy is one of my favorites to use RMDs that you don’t need.

Simply use your excess RMDs to pay the taxes on a partial Roth IRA conversion. This has an immediate benefit for donations made, and a longer term benefit. let me explain.

Let’s say that you have $10,000 in RMDs that you don’t need this year. And you are in the 25% income tax bracket.

If you took $40,000 from your traditional IRA and did a partial Roth IRA conversion, you would owe approximately $10,000 on the conversion tax.

So you see where I am going with this now? You have essentially turned $40,000 into a tax-free account that will also not be subject to future RMDs.

Qualified Longevity Annuity Contract – Retirement Income For Life Expectancy

A QLAC is an annuity contract that you purchase inside your retirement account, such as a 401(k) or an IRA. Unlike other annuities, which generally start making payments immediately, a QLAC doesn’t start paying out until you reach a certain age, such as 85.

However, once it does start paying, it pays for the rest of your life. QLACs can be a good option for people who are looking for a way to generate income in retirement, but don’t want to give up access to their retirement savings.

That’s because with a QLAC, you don’t have to take required minimum distributions (RMDs) from your account until the annuity starts paying out. This can be a big advantage, since RMDs can often trigger a higher tax bill.

Longevity annuities are purchased with a lump sum of money today, with payouts beginning in the future.  Usually at age 80 or  85. 

QLACs, or qualified longevity annuity contracts, are commonly purchased using IRA funds using longevity annuities . 

When calculating the IRA’s RMD, money held in an IRA QLAC is ignored. Any non-annuity holdings are used to calculate your RMD.

Related Readings:

Charitable Contributions- Donating Money To Charity

IRA RMD Withdrawal Taxes
Photo by Liza Summer: https://www.pexels.com/photo/crop-anonymous-person-showing-donation-box-6348119/

One last strategy, and best – Give it away to someone else through charitable donations.

If you’ve been considering making a charitable contribution but need to take an RMD, try killing two birds with one stone by donating your RMD to a cause you care about. You can donate up to $100,000 per year to an eligible charity using a method known as a qualified charitable distribution QCD.

  • These qualified charitable distributions (QCDs) can satisfy a person’s RMD requirements without increasing taxable income, and they are an excellent way to support charitable causes while also getting tax benefits.
  • QCDs are not included in the gross income of the retirement account owner, and therefore, are not subject to income tax.
  • QCDs can only be made as a direct transfer from your retirement account custodian to a qualified charity.
  • QCDs can be made to as many qualified charities as the person desires.

Whatever you decide to do with your RMDs, be sure to consider your options carefully and make the best decision for your financial situation.


As we approach retirement, many of us are focused on how to make our retirement savings last. One important question to consider is what to do with required minimum distributions (RMDs) once we start taking them. There are a few different options for what to do with RMDs that we don’t need.

We can withdraw the funds and use them to cover expenses, we can leave the funds in another account and let them continue to grow, or we can donate the assets to charity.

Withdrawing the funds and using them to cover retirement living expenses is the most common option. This can help to ensure that we don’t outlive our savings. However, it’s important to remember that any funds we withdraw are subject to income tax.

Donating the funds to charity is a third option. This can be a great way to reduce our tax liability, and the funds can be used to support a cause that we’re passionate about. However, it’s important to make sure that we choose a charity that is reputable and that we’re comfortable with the way they will use the funds.


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Note: The content provided in this article is for informational purposes only and should not be considered as financial or legal advice. Consult with a professional advisor or accountant for personalized guidance.

Michael Ryan
Michael Ryanhttps://michaelryanmoney.com/
A former stockbroker, financial planner, and owner of my own financial planning practice and then a property & casualty agency. I have since retired and decided I want to help individuals and business owners by offering personal financial coaching. And now, I have started my blog - www.michaelryanmoney.com - to bring financial literacy to everyone. In a short time I have already been quoted and featured in US News & World Report, Business Insider, Yahoo Finance, and more (https://michaelryanmoney.com/home/press/) As a financial planner, I helped people from all walks of life. If you have questions about money, I will help you find the answers at www.MichaelRyanMoney.com
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