What to do with your RMDs if you don’t need the money: 6 smart strategies

If you don’t immediately need the money from your required minimum distributions (RMDs), you have options to make the most of your retirement savings. Popular examples include investing in life insurance, reinvesting in taxable brokerage accounts, funding a loved one’s college expenses with a 529 plan, initiating a Roth IRA conversion or donating your RMDs to a charitable cause.

Let’s unpack the details of each option to help you determine which makes the most sense for your goals and circumstances.

Certain retirement accounts offer tax deferral, where the IRS doesn't collect taxes on your contributions or their earnings until you withdraw the money. But to ensure retirees eventually take the money out and pay the taxes owed on it, the IRS has designated an age at which you have to start withdrawing a minimum amount of money every year.

You must take RMDs if you're the original owner of certain tax-deferred retirement accounts, including:

• Traditional IRAs
• 401(k)s
• 403(b)s
• 457(b)s
• SIMPLE IRAs
• SEP IRAs
• Defined contribution plans
• Profit-sharing plans

Roth IRAs and other Roth accounts do not have RMDs.

The age you must start taking annual RMDs depends on your birth year:

• Born 1951–1959: You must take RMDs starting at age 73.
• Born 1960 or later: You must take RMDs starting at age 75.

If you're employed when you reach your RMD age (and you don't own 5% of the company you work for), you can wait until you retire to take RMDs from that employer's qualified plan if the plan allows it.¹

RMDs are taxed as ordinary income, and you must keep taking them every year until you deplete your account. Any RMD amount you don't withdraw may be subject to a 25% excise tax, though that may drop to 10% if you take the missed RMD within two years.

Yes, you just can’t put it back into a tax-deferred retirement account. RMDs must be taken as taxable income, but the funds can be added to a taxable brokerage account and invested in diversified assets such as mutual funds or exchange-traded funds (ETFs).

“If you don’t need it to fund your retirement,” says Tony Watson, senior advice services consultant at Thrivent, “you could invest it in a taxable account, spend it on experiences or travel, use it for insurance premiums or gift it to heirs now so they can enjoy the money while you’re living.”

Some investors also consider in-kind distributions, where securities from a retirement account are transferred directly into a taxable brokerage account instead of being sold first. The value of the securities at the time of transfer becomes the new cost basis.

Your RMDs are determined each year by dividing the account's prior year-end value by a life-expectancy factor set by the IRS. You can either ask the administrator of your account or calculate it yourself by using the IRS's RMD worksheet. You'll need:

• Your age
• Your account balance as of December 31 of the previous year
• The Uniform Lifetime Table (or other table for your situation)

Using your information and the table, look for the life expectancy factor associated with your age. For example, a 75-year-old has a life expectancy factor of 24.6. If this same 75-year-old had $200,000 saved in a traditional IRA at the end of the previous year, that balance divided by 24.6 would put that person's RMD at $8,130.08.

That calculation is used for every qualifying account you own. For married couples, the individual rate only changes if one spouse is at least 10 years younger than the other. In that case, use the IRS joint life expectancy table to calculate your alternate RMDs.

Here are six ways to use RMDs in retirement, whether you choose to use any of the money for day-to-day expenses or not.

Supporting yourself in retirement with RMD funds is a tax-efficient strategy, especially if you think you'll be in a lower tax bracket than you were in your working years. (Remember that RMDs are taxed as ordinary income.)

While you prepare for retirement, consider creating a retirement budget that includes everything from mortgage or rent payments, property taxes, homeowners insurance, home repairs, utility bills, groceries, and phone and internet expenses. Creating this retirement budget list can help you identify goals, set spending priorities and establish savings targets.

As part of your retirement budgeting process, ask yourself:

• When do you expect to retire?
• Do you expect to work part-time after that?
• Do you have a pension that will partially fund your retirement?
• How much Social Security might you receive?

A retirement income calculator can help you gauge whether your savings are on track to meet your financial goals.

If you don't allocate these retirement funds toward living expenses, you may wonder if you can reinvest your RMDs elsewhere until you need them. Yes, and that need may come in the form of an emergency savings account. Unplanned expenses and medical costs are common during retirement, and an accessible emergency fund can keep your budget from getting derailed.

Ideally, you shouldn’t touch certificates of deposit (CDs) until they mature. And constantly deducting funds from the daily balance in your savings account will affect the interest. However, reinvesting some or all of your RMDs into mutual funds, ETFs or annuities can help you balance the ability to quickly access your money (liquidity) with the opportunity for ongoing growth:

• Mutual funds. If you have a taxable brokerage account, you can invest in a managed, diversified pool of stocks or bonds through a mutual fund. You can choose funds based on your growth goals, your risk tolerance and how soon you expect to need the money. Mutual funds are relatively easy to sell when needed, and some produce income through periodic dividend distributions. You can also name beneficiaries to receive the fund in the event of your death.
• ETFs. If you have a taxable brokerage account, you also can invest in a diversified pool of stocks or bonds through an ETF. Like mutual funds, you can select investments that match your growth goals, risk tolerance and time horizon. ETFs can be bought or sold during the trading day like stocks, and some also provide income through dividend distributions. Beneficiaries may be designated to receive the investment upon your death, too.
• Annuities. Annuities can help convert your RMDs into an ongoing income stream guaranteed to last throughout the rest of your life. You'll pay income taxes on the RMDs in the years you take them. But after you've used RMD money to purchase the nonqualified (after-tax) annuities, the earnings again can grow tax-deferred until you withdraw them. Many annuities offer opportunities to provide death benefits or recurring income distributions to beneficiaries.

Another consideration is delaying RMDs by transferring a portion of your retirement assets into a qualified longevity annuity contract (QLAC). In 2026, you can invest up to $210,000 in a QLAC. The QLAC can later provide an ongoing, lifetime income stream. You must start taking distributions by the time you reach age 85.

If you don't need your RMDs for retirement expenses, you can put them into a tax-advantaged 529 college savings plan for a child or grandchild. You'll pay income taxes on any RMD in the year you take it. But once that money is in the 529, earnings grow tax-deferred, and the beneficiary's withdrawals to pay qualified education-related costs are tax-free.

If it turns out you put more RMD money into the 529 than the beneficiary needed for college, the beneficiary may be able to do a 529 plan rollover to a Roth IRA without incurring penalties for spending the funds on nonqualified expenses.

Is life insurance in your estate plan?

Your estate includes your money, property, investments and other belongings. But everything you own may not be automatically passed down to loved ones, and others may be subject to estate tax when you die.

Learn more about navigating life insurance and estate planning

Another strategy for spending your RMDs is buying life insurance, which can help you build a legacy that benefits either your loved ones or a cause you care deeply about.

Alternatively, you can name a charity as the beneficiary of your life insurance contract. Then, upon your death, proceeds from the contract will support that cause. This arrangement also may offer tax benefits, including the possibility of deductions for your premium payments.

You also can support a qualified charitable distribution (QCD), which meets your RMD requirement while providing charitable intent and potential tax benefits.

Individuals older than 70½ can give up to $111,000 in 2026 (adjusted for inflation yearly) from a traditional or inherited traditional IRA tax-free.

People age 70½ and older can give a one-time gift of up to $55,000 in 2026 (out of the total $111,000 allowed in QCDs per year from an IRA). Gifts can go to a charitable remainder unitrust (CRUT), charitable remainder annuity trust (CRAT) or charitable gift annuity (CGA).

For the gift to count in any particular tax year, it must come from your account by Dec. 31.

If paying taxes on your RMDs throughout retirement is a concern, you might consider completing a Roth IRA conversion. This won't provide a financial benefit in the year you complete the conversion, but it can remove your obligation to take RMDs in the years that follow.

Roth IRA conversions have several advantages, including alleviating concerns of future tax rates and maintaining your current tax bracket.

The downside is that your taxable income will rise in the year of the conversion, and you may have to wait at least five years to withdraw the earnings on a tax-free basis.^2,3 Additionally, you must satisfy your current year's RMD requirement before the conversion.

A Roth conversion may be appropriate if you:

• Won't need the RMD income during your lifetime
• Seek the potential for continued tax-deferred growth
• Believe your heirs will be in a higher tax bracket when they inherit these funds than the tax bracket you're in now

More on the pros and cons of Roth IRA conversions

Even if you’re required to take RMDs, you’re not limited in how you use them. With the right strategy, those distributions can support your long-term goals, reduce future tax burdens or create a meaningful impact for your family or the causes you care about.

As you consider all the options for your retirement accounts, your Thrivent financial advisor can help you figure out your annual RMDs and decide which approach is right for you.