What Should You Do With Your RMD? Three Ideas.
As we move past Thanksgiving and settle into the heart of the holiday season, many retirees shift their attention from travel and family gatherings back to year-end financial to-dos. One of the most important — and one that can easily get lost amid the celebrations — is making sure your Required Minimum Distribution (RMD) is taken before December 31st.
Whether this is your first RMD or you’ve been taking them for years, this time of year is a reminder that while the IRS tells you how much to withdraw, you still have full control over what you do with the money next. And the choices you make with your RMD can meaningfully impact your taxes, your investment strategy, and the legacy you leave for family or charity.
In this month’s article, we’ll walk through how RMDs are calculated in 2025 and three smart ways to put them to work:
Moving your RMD to a taxable brokerage account
Gifting to family, especially during the holidays
Using Qualified Charitable Distributions (QCDs) for tax-efficient giving
How RMDs Are Calculated in 2025
Required Minimum Distributions apply to most tax-deferred retirement accounts, including traditional IRAs, SEP IRAs, SIMPLE IRAs, and most employer-sponsored plans.
Here’s what’s accurate for 2025:
RMD Starting Age
The RMD age is 73 for most retirees in 2025.
The RMD age will increase to 75 for those born in 1960 or later (this takes effect in 2033).
How the IRS Calculates Your RMD
Your annual RMD is based on two things:
Your account balance as of December 31 of the prior year
Your IRS life expectancy factor, from the Uniform Lifetime Table
Example:
If your IRA balance on December 31 was $750,000 and your factor is 26.5, your RMD for 2025 would be:
$750,000÷26.5=$28,302\$750{,}000 ÷ 26.5 = \$28{,}302$750,000÷26.5=$28,302
This full amount is normally taxed as ordinary income — unless you use a QCD, which allows part of it to bypass your tax return entirely.
Important: If you don't take your RMD on time, the IRS can impose a penalty of 25% of the amount not withdrawn (reducible to 10% if corrected promptly).
1. Move Your RMD Into a Taxable Brokerage Account
If you don’t need your RMD for monthly spending, one of the simplest and most effective strategies is to take the RMD, pay the tax, and reinvest the remainder into a taxable brokerage account.
Keep Your Money Working
Taking an RMD doesn’t mean the money must sit in cash. In a brokerage account, you can invest in:
ETFs and mutual funds
Dividend stocks
Bonds or conservative income strategies
Laddered CDs or Treasuries
This allows the money to continue supporting your long-term plan.
More Flexibility Than Retirement Accounts
A taxable account offers:
No RMDs
No contribution limits
No early-withdrawal penalties
The possibility of lower capital gains tax rates
Tax-loss harvesting opportunities
It becomes your overflow bucket — a place to invest RMD dollars while keeping full control and flexibility.
Supports Future Planning
A brokerage account can later support:
Unexpected expenses
Home projects
Healthcare needs
Future gifting or charitable plans
2. Use Your RMD to Gift to Family
The holiday season is a natural time to think about supporting children, grandchildren, or other loved ones. If your needs are covered, using your RMD to gift can be a meaningful financial and emotional choice.
2025 Annual Gift Tax Exclusion
The annual gift tax exclusion for 2025 is $19,000 per person.
Single filer: You can gift $19,000 to as many individuals as you’d like.
Married couple: You can gift $38,000 per recipient without using any of your lifetime exemption.
These are after-tax dollars, meaning you still pay the tax on your RMD — but you can immediately redirect the funds.
Ways RMD Gifting Helps Family
Helping an adult child with a down payment
Contributing to a 529 college savings plan
Funding a grandchild’s Roth IRA (if they have earned income)
Supporting a child finishing school or changing careers
Helping loved ones during a financially tight period
See the Impact of Your Legacy Today
Unlike a future inheritance, gifting lets you see the positive impact now, when it may matter most. And for clients with larger estates, annual gifting can also slowly reduce future estate tax exposure.
3. Donate Using a QCD (Qualified Charitable Distribution)
If giving is part of your values — and especially during the holidays — a QCD is one of the most tax-efficient ways to use your RMD.
QCD Rules for 2025 (Updated)
Available starting at age 70½ (you do not need to be 73).
You can give up to $108,000 per year per individual directly from your IRA to a qualified charity.
Married couples can give up to $216,000 total if each spouse donates from their own IRA.
These limits are now indexed for inflation under SECURE Act 2.0.
Why QCDs Are So Powerful
A QCD:
Counts toward your RMD
Does NOT count as taxable income
Reducing your taxable income may help:
Lower your tax bill
Reduce the taxes owed on Social Security income
Lower Medicare IRMAA surcharges
Avoid income-based phaseouts
This is one of the only ways to turn IRA dollars into never-taxed dollars.
Note: The money must go directly from your IRA custodian to the charity’s account. If it comes to you first, it no longer qualifies.
Final Thoughts: Make Your RMD Work for You Before Year-End
As the holiday season unfolds and we approach the end of the year, your RMD is more than a requirement — it’s an opportunity.
In 2025, you can:
Reinvest in a flexible brokerage account
Support your family during the holidays
Lower your taxable income through charitable giving
The right mix depends on your income needs, tax bracket, charitable goals, and legacy priorities.
If you’re unsure which strategy best fits your plan — or if your RMD should be part of a broader tax, income, or estate plan — we’re here to help. Reach out anytime for a personalized retirement income analysis tailored to your goals.
Disclosure
This material is provided for informational and educational purposes only. It is not intended to be, and should not be interpreted as, specific investment, tax, or financial advice. Investing involves risk, including the potential loss of principal. Individuals should consult with a qualified financial professional before making any investment decisions to determine what may be appropriate for their personal situation.
