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5 Ways to Use Your Required Minimum Distributions this Year

Updated: Dec 5, 2023

If you’re at the age when Required Minimum Distributions (RMDs) have become part of your annual process, it’s time to think about what that money is doing for you. While these distributions are a mandatory part of retirement planning, they also present you with an annual opportunity for strategic financial moves. To help you decide on what to do with yours, we'll explore five ways to make the most of your RMDs: donating to charity, reinvesting, paying for living expenses, paying down debt, and, of course, treating yourself.


1. Donate to Charity

Ready to make an impact on your community?

The IRS allows individuals aged 70½ or older to make Qualified Charitable Distributions (QCDs) directly from their IRAs. This means that you can transfer up to $100,000 annually from your IRA to qualified charities without it being included in your taxable income. By leveraging this strategy, you not only support causes close to your heart but also potentially reduce your overall tax liability.

2. Reinvest Your RMDs

You might consider reinvesting your distribution to continue growing your wealth. If you don't have an immediate need for the funds, reinvesting them can be a savvy strategy to capitalize on potential market gains. Consult with a financial advisor to determine the most suitable investment approach based on your individual circumstances and goals.


3. Pay for Living Expenses

While it's tempting to reinvest or donate your RMDs, it's essential to cover your basic living expenses. For some retirees, RMDs may serve as a significant income stream during retirement. Create a budget that outlines your essential expenses, including housing, healthcare, and daily living costs. Allocate a portion of your RMDs to cover these necessities, ensuring a comfortable and secure retirement. This can also help you keep yourself out of debt throughout the year.


4. Pay Down Debt

Another wise use of your RMDs is to allocate some funds to pay down outstanding debts. Reducing high-interest debts, such as credit card balances or loans, can free up more of your income for day-to-day spending or additional investments.


5. Treat Yourself

Have something you’ve been dreaming of buying or doing for years?

Your RMDs can play a role in enhancing your quality of life. Consider setting aside a portion of your distributions to treat yourself and indulge in activities or experiences that would otherwise be out of reach. Whether it's a dream vacation, a hobby you've always wanted to pursue, or simply pampering yourself, incorporating some discretionary spending into your retirement plan allows you to enjoy the journey.

By thoughtfully allocating your RMDs, you can create a comprehensive financial plan that aligns with your values and aspirations in retirement. Remember to consult with a financial professional to tailor these strategies to your unique circumstances and make informed decisions for your financial future.


Need help planning for your financial future?

Contact CSi Advisory Services to learn more about our services and set up a consultation!


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.


Securities are offered through LPL Financial, member FINRA/SIPC. Investment advisory services offered through CSi Advisory Services a registered investment advisor. Insurance services offered through HUB International. CSi Advisory Services and HUB International are separate entities from and not affiliated with LPL Financial.

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