Ask the Hammer: Where Can I Invest My RMD?

Robert Powell, CFP®

Where can you put your RMD? And how best to save on taxes because of RMDs.

That's the reader question Jeffrey Levine, director of advanced planning at Buckingham Wealth Partners, tackled in this episode of Ask the Hammer.

So, what's the answer?

You can put it anywhere, says Levine. "Once it comes out of the IRA or the 401(k), wherever you're taking that RMD from, once it's out, it's yours," he says. "You can do whatever you want with it."

You can put it in a bank account, or brokerage account, or even in your mattress.

"The one thing you can't do is put it back into another retirement account," says Levine. "Other than that, it's your money."

Now as for lowering your tax bill you have one good option if you're 70 1/2 and older, and you're inclined to donate to charities.

"You can use (your RMD) to fund your charitable intent through something called a qualified charitable distribution," says Levine. 

It's a way to take money out of your IRA and have it go right to a charity. 

A QCD is especially helpful if you don't itemize because it lowers your adjusted gross income and thus your taxable income. And a lower AGI could, among other things, help some Medicare beneficiaries reduce or eliminate income related monthly adjustment amounts (IRMAA) on Part B and Part D premiums, says Levine.

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