Don't Need Your Required Minimum Distribution (RMD) Just Yet? Here's What You Can Do With the Cash Influx.

Source The Motley Fool

Required minimum distributions (RMDs) are the minimum amounts you must withdraw each year from certain retirement accounts to stay on the good side of the IRS. These accounts include traditional IRA, SEP IRA, SIMPLE IRA, and other pre-tax retirement plan accounts.

As of now, you're required to start taking RMDs at age 73 so you can start paying taxes on those withdrawals. However, if you're part of a workplace plan like a traditional 401(k), you may be able to delay your enrollment until the year you leave the workforce.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

If you don't need the extra cash flow from your RMDs, those withdrawals might feel like a big headache. Worse, they could even bump you into a higher tax bracket. But don't worry -- there are smart ways to make the most of your RMDs. Here are two options that are worth considering.

An older adult sits at their computer, happily reviewing their finances.

Image source: Getty Images.

1. Put your money to work

It might be tempting to withdraw your RMD and let it sit idle in a checking account. But why stop your money from working for you? Instead, consider reinvesting it in a taxable brokerage account so your funds can continue to grow.

Let's say you invest in dividend-paying stocks. You'll owe taxes on the income you earn, but you'll be able to build a steady stream of dividend income that potentially pays you every month. Or you can invest in growth stocks and ride the wave of capital appreciation.

Want to spread your risk? Consider exchange-traded funds (ETFs), and you'll have instant diversification.

If you're still earning income from side gigs or other work, you can use your RMD money to fund a Roth IRA if you qualify.

2. Determine if a QCD is right for you

Not feeling up to managing your RMD? Maybe you'd rather put that money to good use supporting others. A qualified charitable distribution (QCD) might be your cup of tea. If you're 70 1/2 or older, you can use a QCD to satisfy your RMD and support your favorite charity without itemizing deductions.

The best part? It won't bump up your taxable income. The money has to go straight from your IRA trustee to the qualified charity, though, to remain tax-free.

For 2024, the tax-free charitable donation cap through QCDs has climbed to $105,000. If you're married, you and your spouse can donate up to $210,000 combined -- as long as you have separate IRAs and check the box on the requirements.

Pay attention to the deadlines so your RMD can count for the current year. Also, grab a written acknowledgment of your contribution from the charity before filing your tax return.

What happens if you don't take your RMD?

Not needing your RMD is one thing, but not taking it? That's a whole other story -- and can cost you a pretty penny. Whether you've got cash to spare or not, Uncle Sam still expects you to take your RMD before the deadline. If you miss it, you'll face a penalty tax of up to 25% on the amount you skipped.

To avoid this penalty, make sure you know the rules, and calculate your RMD correctly. Some financial institutions might handle this for you, but it's always a good idea to double-check their math.

RMDs now kick in at age 73, with most due by Dec. 31 each year. If you turn 73 in 2024, your first RMD deadline is April 1, 2025. And you'll need to take your next RMD by Dec. 31, 2025.

If RMDs are on your to-do list, make sure to plan ahead so you can put that money to work and make the most of it.

The $22,924 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Dollar presses 102 as the 10-year yield sits at 5.14% — and October hike odds are only 17%The dollar index closed at 101.99 (+0.20%) on Monday after briefly topping 102.07, while the 10-year Treasury yield rose to 5.14% and the 2-year hit 4.774% — yet futures price only about a 17% chance of a hike at the October 27-28 FOMC, versus roughly 90% for December. The driver is a global bond selloff, not a Fed repricing: France's 10-year OAT jumped to 4.84% ~ 4.94% and the OAT-Bund spread widened to 140 ~ 146bp. Here are the levels, the cross-asset read-through and what to watch.
Author  Irene Q.
Oct 20, Tue
The dollar index closed at 101.99 (+0.20%) on Monday after briefly topping 102.07, while the 10-year Treasury yield rose to 5.14% and the 2-year hit 4.774% — yet futures price only about a 17% chance of a hike at the October 27-28 FOMC, versus roughly 90% for December. The driver is a global bond selloff, not a Fed repricing: France's 10-year OAT jumped to 4.84% ~ 4.94% and the OAT-Bund spread widened to 140 ~ 146bp. Here are the levels, the cross-asset read-through and what to watch.
placeholder
Tesla Q3 Earnings Preview: Can Auto Margins Stabilize? Wall Street’s Highest Price Target at $550Tesla (TSLA) will report its third-quarter 2026 financial results after the U.S. stock market close on October 21, Eastern Time, and host an earnings conference call at 17:30 that day. Th
Author  TradingKey
Oct 20, Tue
Tesla (TSLA) will report its third-quarter 2026 financial results after the U.S. stock market close on October 21, Eastern Time, and host an earnings conference call at 17:30 that day. Th
placeholder
The Dow gained 500 points and the two AI names that matter fell after hours — Netflix's guide is the tellThe Dow closed 529.85 points higher at 52,495.88 (+1.02%) and the VIX fell 6.13% to 17.31, but the two stocks that carry the AI trade moved the other way after Tuesday's close: Netflix slipped to $64.74 (-5.8%) after guiding Q4 EPS of $0.67, below the street, while SpaceX jumped about 8% to near $160 on its first profit as a public company and revenue up 161%. Netflix is now below its 52-week low of $65.08. Here are the numbers, the $65 / $70 levels and the two catalysts that matter this week.
Author  Irene Q.
Yesterday 05: 56
The Dow closed 529.85 points higher at 52,495.88 (+1.02%) and the VIX fell 6.13% to 17.31, but the two stocks that carry the AI trade moved the other way after Tuesday's close: Netflix slipped to $64.74 (-5.8%) after guiding Q4 EPS of $0.67, below the street, while SpaceX jumped about 8% to near $160 on its first profit as a public company and revenue up 161%. Netflix is now below its 52-week low of $65.08. Here are the numbers, the $65 / $70 levels and the two catalysts that matter this week.
placeholder
Gold Price Analysis Today | Forex Gold Analysis | XAU/USD Analysis - October 22, 2026Get the latest gold price analysis, forex gold insights, and XAU/USD analysis for October 22, 2026. Read on for the details.
Author  Mitrade
9 hours ago
Get the latest gold price analysis, forex gold insights, and XAU/USD analysis for October 22, 2026. Read on for the details.
placeholder
The Fed will sit still on October 28 — but 100 of 100 economists now expect a December hikeA Reuters poll run October 16-20 found 94 of 100 economists expecting the Fed to hold at 3.75-4.00% on October 28 — and all 100 expecting a hike in December, against less than half a month earlier. The market is close to the same price, with CME FedWatch at roughly 17% for October and 82.8% for December. With the Fed in blackout since October 17, here are the five dates that decide the rest of the year, what each one is priced for, and the two directions each can take.
Author  Irene Q.
5 hours ago
A Reuters poll run October 16-20 found 94 of 100 economists expecting the Fed to hold at 3.75-4.00% on October 28 — and all 100 expecting a hike in December, against less than half a month earlier. The market is close to the same price, with CME FedWatch at roughly 17% for October and 82.8% for December. With the Fed in blackout since October 17, here are the five dates that decide the rest of the year, what each one is priced for, and the two directions each can take.
goTop
quote