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6 ways to use required minimum distributions in retirement

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After focusing on saving for decades, shifting your retirement money mindset to withdrawing those savings could take some effort. But once you’ve retired, that might be exactly what you must learn to do—regardless of whether you need the money immediately.

If you have certain retirement accounts, such as traditional individual retirement accounts (IRAs) or 401(k)s, you must take RMDs, or required minimum distributions, from those accounts once you hit a certain age.

Here’s an overview of how required minimum distributions work, along with six ways you might use these savings.

How required minimum distributions (RMDs) work

The government introduced tax-deferred savings in the 1970s to encourage individuals to save for retirement. And, to ensure that retirees would eventually pay taxes on those accounts, the law set the age when withdrawals would be required to begin. You will have RMDs if you’re the original owner of tax-deferred retirement accounts including:

Note that Roth IRAs do not have RMDs for account owners. And starting in 2024, other qualified retirement plan Roth accounts, like Roth 401(k)s, won't either due to changes that were enacted in the Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0.

The act has also changed RMD age requirements. If you were born:

  • Between 1951-1959: Your RMD start date is at age 73
  • In 1960 or after: Your RMD start date is at age 75

If you're still working at your RMD age and don't own 5% of the company you work at, you may delay taking RMDs from that employer-sponsored 401(k) until you retire, if the plan allows it.

RMDs are taxable, and you must continue them until you deplete your account. If you don't take your RMDs, there is a 25% penalty on the shortfall. If you fix your mistake during a corrections window, the penalty may drop to 10%. You still need to pay any penalty plus ordinary income tax due on the distribution.

How to calculate your RMDs

Your RMDs are determined each year by dividing the account’s prior year-end value by a life-expectancy factor set by the IRS.

The easiest way to calculate your RMD is to ask the administrator of your account, but you can also calculate it yourself using a worksheet. You'll need:

Using your information and the table, look for the life expectancy factor associated with your age. For example, per the most recent table, a 75 year old has a life expectancy factor of 24.6.

To determine the RMD, divide your account balance by the life expectancy factor. Using the example above, if that 75-year-old had $200,000 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.

The calculation is used for every qualifying account you own. Marital status only affects your RMD calculation if one spouse is at least 10 years younger than the other. In this case, use the IRS joint life expectancy table to calculate your RMDs.

6 ways to use your RMDs

It’s worth noting that, as the name suggests, your required minimum distributions are the minimum amount you can withdraw from your retirement accounts each year. Depending on your strategy for using the funds, you may choose to withdraw more. There are many ways to use your RMDs in retirement, and we’re highlighting six of them.

1. Use your RMDs for living expenses

Many retirees use RMDs to cover routine expenses. Using the funds you worked so hard to save for your retirement lifestyle is a worthy goal, especially if you don't expect to be in a higher tax bracket during retirement since RMDs are taxed as ordinary income.

Think about how RMDs factor into your retirement budget. For example:

  • Are you working part time?
  • Do you have a pension partially funding your retirement?
  • How much Social Security might you be getting?1

retirement income calculator can help you inventory your retirement income sources.

2. Save or reinvest your RMDs

Saving your RMDs is another option. You may want to add to your emergency savings account so you’re prepared in retirement for unplanned expenses or medical costs.

Depending on your situation, you might consider reinvesting some or all of your RMDs in a mutual fund or an annuity to ensure your retirement income strategy works the way you planned.

  • A mutual fund may be appropriate if you like the potential of continued growth and want to explore investment options.
  • An annuity is an option if you want potential earnings to grow tax-deferred and to provide for your heirs.

You may also delay taking RMDs on a portion of your retirement assets by transferring them to a qualified longevity annuity contract (QLAC). You can invest up to $200,000 in a QLAC, protecting those funds from RMDs while helping to increase income payments from the annuity. Then when you reach 85, you must take distributions.

3. Complete a Roth IRA conversion

If paying taxes on your RMDs throughout retirement is a concern, you might consider completing a Roth IRA conversion.2 Roth IRA conversions have several advantages, including:

  • Diversifying your investment portfolio
  • Alleviating concerns of future tax rates
  • Maintaining your current tax bracket
  • Avoiding RMDs

The downside is your taxable income the year of the conversion will rise, and you will have to wait at least five years to withdraw the earnings on a tax-free basis. Additionally, you must satisfy your current year’s RMD requirement prior to 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.
  • Are in a lower tax bracket now compared to what you think you’ll be in at age 72.
  • Believe your heirs will be in a higher tax bracket when they inherit these funds than the tax bracket you’re in now.

> Read about the pros and cons of Roth IRA conversions for more detailed information.

4. Pay college expenses

As college costs climb, students rely more on financial help from grandparents and parents. If you don't need RMDs for your retirement expenses, you may effectively reduce the size of your estate by using them to fund a tax-advantaged college savings account.

Thanks to the SECURE Act 2.0, you may roll over a lifetime cap of $35,000 from a 529 plan to a Roth IRA in the student beneficiary's name, starting in 2024. However, the 529 account must be at least 15 years old and the owner needs to have earned income. Rollovers will be subject to the annual Roth IRA contribution limit of $6,500 in 2023 or $7,000 in 2024. Those age 50 and older can add an additional $1,000 catch-up contribution.

5. Use RMDs to pay for life insurance

Another RMD strategy can help you create a legacy beyond your lifetime for the benefit of your loved ones. If you’re healthy and don’t need RMDs for living expenses, you could use the after-tax portion to fund a life insurance policy. The death benefit of the life insurance could eventually be used to pay the taxes due on the IRA, leaving the full remaining value of the IRA for your loved ones.

Alternatively, if you could name a charity as the beneficiary of your life insurance contract, proceeds from the contract could support this cause after you pass away.

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Charitable Strategies: Charitable Life Insurance

6. Use RMDs to donate to charity

Supporting charity is an essential value for many. So you can use the deduction from donating your RMD to offset your tax liability while still doing good for causes that matter.

qualified charitable distribution (QCD) can help you meet your RMD requirement while providing charitable intent and potential tax benefits.

Here's what to know:

Talk to a financial advisor

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

1If you are still working for an employer that provides a qualified retirement plan, RMDs may be delayed until you retire if your employer elected delayed distribution. If you are a 5% or more owner of the business, RMDs must begin by April 1 of the year following reaching age 72.

2State tax rules may differ from federal rules governing the tax treatment of Roth IRAs and there may be conflicts between federal and state tax treatment of IRA conversions. Thrivent and its financial advisors do not provide tax, accounting or legal advice. As such, consult your tax professional or attorney, as applicable.

Guarantees based on the financial strength and claims paying ability of Thrivent.

Holding an annuity inside a tax-qualified plan does not provide any additional tax benefits..

Life insurance contracts have exclusions, limitations and terms under which the benefits may be reduced, or the contract may be discontinued. For costs and complete details of coverage, contact your licensed insurance agent/producer. Under current tax law [IRC Sec. 101(a)(1)], death proceeds are generally excludable from the beneficiary's gross income. However, death proceeds may be subject to state and federal estate and/or inheritance tax.  If requested, a licensed insurance agent/producer may contact you and financial solutions, including insurance may be solicited.

Investing involves risk, including the possible loss of principal. The mutual fund prospectus contains information on investment objectives, risks, charges and expenses, which investors should read carefully and consider before investing. Available at

Thrivent financial advisors have general knowledge of the Social Security tenets. For complete details on your situation, contact the Social Security Administration.

Concepts presented are intended for educational purposes. This information should not be considered investment advice or a recommendation of any particular security, strategy, or product.