Once you start taking Required minimum distributions (RMDs) At age 73, you must withdraw a set amount each year from pre-tax retirement accounts. If you don’t need this money for living expenses, you can still use it productively. Many retirees choose to reinvest their RMDs in a taxable brokerage account, add to emergency savings, purchase income-producing investments, pay down debt, or use a portion of the funds for qualified charitable distributions to reduce taxable income. A Financial advisor It can help you decide which option supports your overall retirement plan.
Once you get your RMD, the money becomes taxable income, but you can still put it to work. After paying the taxes due, you can reinvest the remaining funds in a regular investment account. Popular options include mutual funds, Exchange Traded Funds (ETFs)Or dividend-paying stocks or high-yield savings products. The goal of this strategy is to keep your money growing, even if you leave your retirement account.
Before reinvesting, think about when you might need the money. If you expect to use it within a few years, you may want safer options such as Certificates of Deposit (CDs)Or money market funds or short-term Treasuries. If you can leave your invested money longer, a mix of stock and bond funds can provide income and growth potential. It’s also important to review how new investments will affect your taxes, as gains may be reported in the taxable account each year.
Reinvesting your RMD can make sense for retirees who already have fixed income from Social Security, pensions, or annuities and who don’t rely on RMDs to pay regular expenses. He can also work with retirees who want to grow their investment portfolios to cover future health care costs or leave more assets to heirs. Keeping this money invested can help maintain your purchasing power over time.
After paying the taxes on your RMD, you can move the remaining funds from a Traditional IRA, SEP IRA, SIMPLE IRA, 401(k), or 403(b) into a regular investment account. This keeps your withdrawn money invested and gives it the ability to continue to grow even after you leave Deferred tax calculation.
You can also transfer In-kind assets From your retirement plan to a taxable account instead of selling it. This means that you transfer the same investments, such as mutual funds, ETFs, or individual stocks, and the value of that transfer counts toward your RMD. The IRS only requires that you make a withdrawal and pay tax on it. You are not required to sell or spend money.
Taxable accounts can generate income and Capital gains Which you may have to report every year. A Financial advisor or tax specialist They can help you review your reinvestment options, manage tax implications, and ensure the plan fits your overall retirement goals.
Funding an annuity with RMDs can make sense for retirees who already have enough liquid assets to meet short-term needs and want to secure a portion of their future income. This strategy converts a portion of your retirement savings into predictable payments while keeping other assets available for growth or emergencies.
that A pension is a contract With an insurance company that exchanges a down payment for a guaranteed income. Some retirees use RMD annuities to gradually fund annuities that begin payments in the late 70s or early 80s, when other sources of income decline.
For example, a retiree who receives an RMD annuity can use these withdrawals to purchase portions of the RMD Deferred income pension. By age 80, these purchases may provide additional monthly income for life, depending on interest rates and contract terms.
Different types of annuities offer different benefits. Fixed annuities Pay a fixed amount, while a variable is Indexed annuities Link payments to the performance of an investment or market index. Some contracts include inflation riders that increase payments over time, although this usually reduces the initial payment. Because costs, surrender periods and guarantees vary, it is important to compare options before committing funds.
An elderly couple reviews their savings to make sure they have enough cash set aside to cover unexpected expenses in retirement.
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that Emergency fund It gives you quick access to cash to cover unexpected costs like home repairs, medical bills, or travel to help family. Having this reserve can prevent you from selling long-term investments at the wrong time.
In retirement, a market decline can have a greater impact because you may rely on your portfolio for income. An emergency fund helps reduce these risks by providing protection during periods when markets decline. Instead of withdrawing from your investment accounts during a recession, you can withdraw from your cash savings until the markets stabilize.
You can keep your RMD funds in safe, interest-bearing accounts such as high-yield savings accounts, money market funds, or CDs. For example, if you receive $10,000, putting it in an account earning 4% annual interest adds liquidity and modest growth. These accounts protect capital and allow easy access without exposure to the market.
Reinvest your RMD in Qualified Charitable Distribution (QCD) It can reduce taxable income and improve the efficiency of your retirement withdrawals. A QCD allows you to transfer up to $108,000 in 2025 from an IRA directly to an approved charity once you reach age 70½.1. If you are 73 or older, the transferred amount also counts toward your RMD, but is excluded from your calculation. Adjusted gross income (AGI).
Because the QCD amount is never included in taxable income, you get the full benefit even if you use the standard deduction. For example, if your total RMD is $30,000 and you direct $12,000 to a charity through a QCD, only $18,000 shows up as taxable income. A smaller income number can help keep you in a lower tax bracket and reduce the impact of the income-based phaseout.
Lowering your AGI can also help you reduce income taxes on Social Security benefits, limit exposure to the Medicare income surcharge, and maintain eligibility for certain tax credits.
Although you cannot use RMD withdrawals Complete Roth IRA conversionsYou can use it to pay taxes resulting from those transfers. So, for example, if your RMD is $40,000, you cannot meet this requirement by converting $40,000 to a Roth IRA. You must first withdraw $40,000 and transfer it to a cash or taxable account. Once the withdrawal is complete, you can use part or all of that $40,000 to pay income taxes due on a separate Roth conversion completed in the same year.
When transferring assets from A Traditional IRA or 401(k) In a Roth IRA, the converted amount is treated as taxable income for that year. Using an RMD to cover your tax bill allows you to convert other funds without reducing the total amount added to your Roth account.
This approach can help you manage future tax exposure and reduce required withdrawals over time. Once assets are in a Roth IRA, they are no longer subject to annual RMDs, and qualified withdrawals are tax-free. By using RMDs to pay transfer taxes each year, you can gradually transfer money out of taxable retirement accounts and create more flexibility for future income planning.
A retiree reviews options for using RMD withdrawals, including investing, charitable giving, or building cash reserves for future needs.
Once you start taking RMDs at age 73, you have to withdraw the money every year, but you can still use it wisely. After paying taxes, you can invest the rest, build additional income with an annuity, keep cash for emergencies, donate through a QCD to reduce taxes, or use it to pay taxes on a Roth conversion. Your choice depends on your income, expenses and goals. A financial or tax professional can help you determine how to get the most out of your RMDs.
A Financial advisor It can help you decide how much to keep in an emergency fund and where to keep it for safety, liquidity, and modest growth. Finding a financial advisor is not difficult. Free SmartAsset tool Matches you with vetted financial advisors serving your area, and you can make a free introductory call with your matched advisors to determine which advisor you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, Start now.
If you want to continually increase your savings, consider this Set up automatic transfers From your checking to your savings accounts. This approach can help you make saving a routine part of your financial life.
“Give more tax-deductible: Eligible IRA owners can donate up to $105,000 to charity in 2024 | Internal Revenue Service.” househttps://www.irs.gov/newsroom/give-more-tax-free-eligible-ira-owners-can-donate-up-to-105000-to-charity-in-2024. Accessed September 19, 2025.
