What to do with required minimum distributions if you don’t need them

As year-end approaches, some older Americans must soon take required withdrawals from retirement accounts — and there are several options if you don’t need the money, experts say. 

Most retirees must take required minimum distributions, or RMDs, from pretax retirement accounts starting at age 73 or face an IRS penalty. The first deadline is April 1 of the year after turning 73, and Dec. 31 is the due date for future years. 

But some retirees have “a lot of guaranteed income” before RMDs, or spend less than they have coming in, according to Judy Brown, a certified financial planner who works at C&H Group in the Washington, D.C. and Baltimore area.

In 2024, Social Security was the most common source of retirement income. But 81% of retirees had one or more types of private income, such as pensions, investments, rental income or employment, according to a Federal Reserve report published in May.  

When retirees have more than they need, there could be decisions about how to spend or reinvest their RMDs, experts say. 

“It can definitely impact a lot of people,” and the right choice depends on your financial needs and goals, said Brown, who is also a certified public accountant.

Here are some options to consider.

If you still want long-term growth, you can reinvest RMD proceeds into a brokerage account. But you need to choose assets carefully because the account incurs yearly taxes, experts say.

Typically, experts suggest exchange-traded funds, or ETFs, over mutual funds in a brokerage account because the assets are less likely to distribute capital gains or dividends throughout the year.  

“It’s also easier for tax-loss harvesting,” which involves selling a losing brokerage account asset to offset other portfolio gains, Brown said. 

Since ETFs trade throughout the day like a stock, you have more control when selling specific assets, she said.

For charitable investors, you could also consider a so-called qualified charitable distribution, or QCD, experts say.  

Open to retirees age 70½ or older, QCDs are a direct transfer from an individual retirement account to an eligible non-profit organization. For 2025, the limit is $108,000 per investor.  

Once you’re 73 or older, you can use QCDs to satisfy yearly RMDs and the transfer won’t increase your adjusted gross income. 

“It’s the IRS’ best-kept secret for retirees,” said CFP Ashton Lawrence at Mariner Wealth Advisors in Greenville, South Carolina. “Skip the tax bill and help a cause you believe in.”

If legacy planning is important, you can also consider using RMDs to contribute to a 529 college savings plan for your family, experts say.

As of May 2025, more than 30 states offer a state tax credit or deduction for 529 contributions, according to education website Saving for College. In most cases, this requires a deposit to your state’s plan. There is not currently a federal income tax break for contributions.

“It’s not going to be enough to offset all of their state [income] taxes,” said Brown. But you can “get a benefit going for the grandchildren” while securing a state tax break for yourself, she said.