The IRS requires you to take your full required minimum distribution, or RMD, whether you need to spend the money or not. When that withdrawal exceeds what your budget calls for, you still must account for the income and decide how to use the amount left after taxes.
You can keep saving, although there are limits on where that money can go. If charitable giving is already part of your budget, a qualified charitable distribution may let you fund those gifts while satisfying part of your RMD without adding that portion to your income. Money you retain can be saved or invested in a taxable account. If required withdrawals haven’t begun, planning ahead may help you manage their future tax cost.
You Can Keep Saving After Taking an RMD
Your RMD can’t be rolled into another retirement account or converted to a Roth IRA, but you can invest the proceeds in a taxable brokerage account or deposit them in a bank account. Moving it out of the IRA changes where you hold it and how it is taxed, without requiring you to spend it.
Your RMD follows an IRS calculation based generally on your previous December 31 account balance and the applicable distribution factor. Your household budget doesn’t enter that calculation, so having enough income from other sources doesn’t reduce the amount you must withdraw.
Once you’ve covered expenses and taxes, you can invest the remaining proceeds in a taxable brokerage account according to when you expect to need them. Investment earnings in that account may be taxable, so consider the effect on your annual tax bill when choosing what to hold there. If your emergency savings need replenishing, you could instead put the money in a high-yield savings or money market deposit account where it remains available for unexpected expenses.
Depending on your custodian, you may be able to transfer securities directly from your IRA into a taxable brokerage account without selling them. With an in-kind distribution, their fair market value when transferred counts toward the RMD and generally determines the amount included in income when the IRA is entirely pretax. You will still need cash available to cover the resulting tax.
You can also use the proceeds to help family or pay down debt, although either use generally leaves the tax on the IRA withdrawal unchanged.
Using Your RMD for Charitable Giving
If charitable giving is already part of your budget, using your IRA to fund those gifts may help you satisfy your RMD while reducing the amount included in income. A qualified charitable distribution, or QCD, allows you to direct eligible IRA funds to charity without first receiving the money yourself.
You must be at least age 70½ when the payment is made, which means you may qualify before RMDs begin. You don’t need to itemize deductions to benefit, and the annual QCD limit is $111,000 per eligible individual in 2026.
The payment must come from an eligible IRA rather than directly from a 401(k). A SEP or SIMPLE IRA generally does not qualify if an employer contribution is made for the plan year ending within the year of the distribution.
If you have deducted traditional IRA contributions for years when you were age 70½ or older, ask your tax preparer whether those contributions reduce the amount of your QCD that can be excluded from income.
Suppose your RMD is $60,000 and you already intend to give $10,000 to charity. You could have your IRA custodian send $10,000 directly to an eligible organization and distribute the remaining $50,000 to you. Assuming the IRA is entirely pretax and the gift qualifies, you would satisfy the full RMD while including $50,000 in income.
If you withdraw the full $60,000 and then write a personal check for $10,000, the entire IRA distribution generally enters income. You would have to qualify for a charitable deduction under the rules that apply to your return, and that deduction would not lower your adjusted gross income.
Medicare premium surcharges generally depend on modified adjusted gross income from two years earlier. For this calculation, that means adjusted gross income plus tax-exempt interest. A qualifying QCD stays out of adjusted gross income, while an itemized charitable deduction does not reduce it. Funding the same gift through your IRA could therefore help you avoid costs that a personal donation would leave unchanged.
Before requesting the payment, confirm that the charity is eligible to receive a QCD. Donor-advised funds do not qualify. Ask your custodian to make the payment directly to the organization and allow enough processing time for it to count in the intended year.
Keep the charity’s acknowledgment and tell your tax preparer about the transaction so it is reported correctly. Under the IRS QCD rules, you cannot also claim a charitable deduction for the amount excluded from income.
If you want the gift to satisfy part of your RMD, arrange it before taking the full withdrawal yourself. A later QCD cannot reverse the taxable income from money you have already received.
Planning Before RMDs Begin Gives You More Choices
Start by estimating your future RMD and adding it to expected Social Security, pension payments, and any taxable investment income. Account for the deductions you expect to claim when estimating the tax those withdrawals could create.
A distribution that exceeds your budget may still be taxed at a favorable rate, particularly if deductions offset some of it. Taking IRA money earlier may help if you would pay less tax on it now than when required withdrawals begin.
After you stop working, you may have several years of lower taxable income before Social Security and RMDs begin. If you are at least age 59½, using IRA funds for spending during that period could cost less in taxes than withdrawing the same money later, while preserving other assets for future expenses. Before age 59½, taxable IRA withdrawals generally carry an additional 10% tax unless an exception applies.
A partial Roth conversion moves some of your IRA assets into a Roth IRA, with the taxable portion included in income that year. That reduces the pretax balance used to calculate future RMDs while allowing the converted money to remain invested. Under the IRS Roth IRA rules, the original owner has no lifetime RMDs, and qualified withdrawals are free of federal income tax.
Choosing a conversion amount takes more than checking how much room remains in your ordinary income tax bracket. Conversion income could cause more of your Social Security to become taxable or affect the rate applied to existing capital gains. It could also reduce healthcare subsidies or increase future Medicare premiums, depending on your circumstances. Our workshop on Creating Tax Efficiency for Retirement Income walks through how to coordinate withdrawals, conversions, and other income sources so you can account for these interactions before choosing an amount.
Your charitable plans can change the result as well. IRA dollars you expect to give through future QCDs could go directly to charity without entering income. Converting those same dollars first could create a tax bill you would otherwise avoid, so retaining enough pretax money for those gifts may be worthwhile.
Before making an extra withdrawal or Roth conversion, compare the tax you would pay now with what you expect to owe if the money stays in the IRA. Future deductions may shelter some withdrawals, and planned QCDs may exclude others from income. Paying tax now to avoid those distributions could leave you with less money. The amount worth taking earlier can change as other income begins, so review the comparison each year.
Want to learn more? Listen to Episode 253 of the Retire With Style Podcast.
