Can I contribute my RMD to a Roth IRA?

The RMD amount itself cannot be contributed to a Roth IRA (it is not eligible for rollover). However, if you have earned income, you may make a regular Roth IRA contribution (up to the annual limit) using RMD proceeds. If you want to get more money into Roth, the better path is Roth conversions of amounts beyond the RMD minimum from your traditional IRA.

Is it better to invest RMD money in bonds or stocks?

In a taxable brokerage account, tax efficiency matters. Stocks held long-term generate capital gains at preferential rates. Broad market index ETFs minimize taxable distributions. Bond interest is taxed as ordinary income — consider holding bonds in tax-advantaged accounts and stocks in taxable accounts (asset location strategy). High-bracket retirees should also consider municipal bonds, which are federal (and often state) tax-exempt.

Can I use my RMD to buy an annuity?

Yes. Immediate annuities are one option for deploying RMD proceeds — they provide guaranteed lifetime income. A Qualified Longevity Annuity Contract (QLAC) is another option: you can use up to 25% of your IRA balance (maximum $200,000) to purchase a QLAC, which starts payments at a later age (up to 85) and reduces RMDs on the amount in the QLAC until payments begin.

What about using my RMD to pay for a Roth conversion?

Smart strategy. If you convert more than your RMD minimum from a traditional IRA to Roth, you will owe taxes on the converted amount. If you use your after-tax RMD proceeds (or other taxable savings) to pay those conversion taxes, you effectively move pre-tax IRA money to Roth without reducing the Roth account to pay taxes. This leaves the full converted amount growing tax-free.

Guide

What to Do With Your RMD Money — 7 Smart Strategies

What are my best options for investing or using my Required Minimum Distribution?

If you do not need your RMD for living expenses, you have several tax-efficient options for the after-tax proceeds. Simply leaving it in a savings account misses the opportunity to continue growing your wealth in a tax-advantaged or tax-efficient way.

The right strategy depends on your tax situation, charitable intent, estate goals, and investment horizon.

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Key RMD Rules

1Strategy 1 — Taxable brokerage: invest RMD proceeds in stocks, bonds, or ETFs. Future growth taxed at capital gains rates (0–20%), not ordinary income rates.
2Strategy 2 — QCD: donate up to $108,000 (2026) directly from IRA to charity. Satisfies RMD and excludes from taxable income.
3Strategy 3 — Gift to family: annual gift exclusion is $18,000 per recipient (2024). RMD proceeds can fund gifts without gift tax.
4Strategy 4 — 529 college savings: fund grandchildren's education with after-tax RMD proceeds.
5Strategy 5 — Pay down debt: high-interest debt payoff is a guaranteed return equal to the interest rate.
6Strategy 6 — I-Bonds and TIPS: inflation-protected savings with competitive yields for conservative retirees.
7Strategy 7 — Additional Roth conversion: take more than the RMD minimum while in a low bracket, converting the excess to Roth for tax-free future growth.

Taxable Brokerage Account: The Default Choice

After paying income tax on the RMD, deposit the after-tax amount into a taxable brokerage account. Invest in tax-efficient funds (broad index ETFs, municipal bonds in high brackets). Future gains are taxed at long-term capital gains rates (0%, 15%, or 20%) — lower than ordinary income rates. At death, beneficiaries receive a step-up in cost basis, potentially eliminating capital gains on inherited taxable accounts entirely.

QCD: The Most Tax-Efficient Option for Charitable Retirees

If you plan to donate to charity, a QCD is superior to taking the RMD and then donating. Here's why: a standard donation requires you to itemize to deduct it, and many retirees take the standard deduction. A QCD never enters your taxable income at all — it's as if the income never existed — reducing AGI, Social Security taxation, and IRMAA exposure. The 2026 QCD limit is $108,000 per person ($216,000 for married couples with separate IRAs).

Common RMD Mistakes to Avoid

⚠Leaving RMD proceeds in a low-yield savings account — missing growth and not considering tax-efficient deployment.
⚠Forgetting that the RMD cannot be rolled back into an IRA or Roth IRA (directly) — it is a taxable event.
⚠Overlooking the QCD option for those who would donate to charity anyway — this is one of the highest-impact tax strategies available.

Related RMD Tools & Guides

RMD CalculatorFull interactive calculator with tax estimate RMD HubAll RMD guides, tables, and tools RMD Tax Treatment GuideUnderstand the tax before reinvesting High Net Worth StrategiesQCD and other tax-efficient options RMD & Social Security TaxImpact of reinvested RMDs on SS benefits RMD Planning ChecklistYear-round withdrawal planning RMD at Age 73Distribution factor 26.5 — first RMD year RMD Table 2026Current year distribution factors

Frequently Asked Questions

Disclaimer: This content is for informational purposes only and does not constitute tax or financial advice. RMD rules are based on IRS Publication 590-B and SECURE 2.0 Act provisions. Always consult a qualified tax professional or financial advisor for guidance specific to your situation. IRS rules may change; verify current requirements at irs.gov.

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