You can reinvest your RMD into a taxable brokerage account without restriction, and you can use the cash to fund a Roth IRA if you have earned income and fall under the income limits. What you cannot do is put the money back into a traditional IRA, 401(k), or any other tax-deferred plan. Once the RMD leaves your retirement account, the IRS treats it as ordinary taxable income for the year, and where it lands next is up to you.
Why an RMD Can’t Go Back Into a Tax-Deferred Account
Federal law excludes RMDs from the list of distributions eligible for rollover. Under 26 U.S.C. § 402(c)(4)(B), any distribution required under the minimum distribution rules is not an “eligible rollover distribution.”1Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees Trust The IRS has confirmed this directly: RMD amounts cannot be rolled over into another tax-deferred account.2Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
If you mistakenly deposit an RMD into an IRA, the IRS classifies it as an excess contribution. That triggers a 6% excise tax on the over-deposited amount for every year it stays in the account.3Internal Revenue Service. Sample Article – IRA Excess Contributions And if you fail to take your full RMD by the deadline, the penalty is 25% of the amount that should have been withdrawn, reduced to 10% if you correct the shortfall within two years.2Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
Moving RMD Proceeds Into a Taxable Brokerage Account
This is the most straightforward destination. Once you’ve paid the ordinary income tax on the distribution, you can put the after-tax cash into a brokerage account and invest it in stocks, bonds, ETFs, or mutual funds with no age-based restrictions and no future distribution requirements. Dividends and realized capital gains are taxed each year, but long-term capital gains rates top out at 20% for the highest earners, and many retirees fall into the 0% or 15% brackets.4Internal Revenue Service. Topic No. 409, Capital Gains and Losses
Brokerage accounts also carry an estate planning advantage. Assets held in a taxable account receive a step-up in basis at the owner’s death, meaning heirs inherit them at current market value rather than the original purchase price. Appreciation during your lifetime escapes capital gains tax entirely.5Internal Revenue Service. Publication 551 (12/2025), Basis of Assets Traditional IRA assets do not get this step-up; beneficiaries owe ordinary income tax on every dollar they withdraw. For retirees who don’t need the cash right away, routing RMD proceeds into a brokerage account and holding appreciated investments can move substantially more wealth to heirs.
Taking the RMD as an In-Kind Transfer
You don’t have to sell investments inside your IRA to satisfy an RMD. Most custodians will transfer shares directly from your IRA into a taxable brokerage account. The fair market value of those shares on the transfer date counts as your distribution amount, and you owe ordinary income tax on that value just as you would with a cash withdrawal. Any future appreciation in the taxable account then gets taxed at capital gains rates instead of ordinary income rates when you sell. Your cost basis in the transferred shares becomes their market value on the distribution date, so you’re only taxed on gains that happen after the move.
This works best when you plan to keep the same investments long-term and want to avoid selling into a down market just to raise cash. Confirm the value of the transferred shares meets or exceeds your full RMD amount, because a shortfall still triggers the missed-distribution penalty.
Using RMD Cash to Fund a Roth IRA
You cannot contribute an RMD directly to a Roth IRA, but you can use the cash from an RMD to make a Roth contribution if you have qualifying earned income from wages, salary, or self-employment. The RMD itself counts as unearned income, so it doesn’t satisfy the earned income requirement on its own. What matters is whether you (or your spouse, if filing jointly) had enough earned income during the year to cover the contribution.6Internal Revenue Service. Retirement Topics – IRA Contribution Limits
For 2026, the Roth IRA contribution limit is $7,500, plus a $1,100 catch-up contribution for anyone age 50 or older, for a total of $8,600.7Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 Income limits apply. Single filers with modified adjusted gross income of $168,000 or more cannot contribute directly, and the limit phases out starting at $153,000. For married couples filing jointly, the phase-out range is $242,000 to $252,000. A non-working spouse can also make a Roth contribution based on the working spouse’s earned income, provided you file a joint return and the combined contributions don’t exceed total household earned income.6Internal Revenue Service. Retirement Topics – IRA Contribution Limits
The payoff is significant. Roth IRAs are not subject to RMDs during the original owner’s lifetime, so the money grows without forced withdrawals.2Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs Qualified withdrawals are tax-free, which makes the Roth a hedge against future tax rate increases. The five-year rule applies to earnings: the account must be open for at least five tax years, and you must be 59½ or older, before earnings come out tax- and penalty-free.
The One Way to Route an RMD Without Paying Tax on It
If you’re charitably inclined, a Qualified Charitable Distribution is worth knowing about even when your main goal is reinvestment. A QCD lets you transfer up to $111,000 per person directly from your IRA to a qualifying 501(c)(3) charity in 2026. The transferred amount satisfies your RMD obligation but never appears on your tax return as income. To qualify, you must be at least 70½, and the funds must go directly from your IRA custodian to the charity; if the check passes through your hands first, the IRS treats it as a regular distribution. Married couples who each have their own IRA can each direct up to $111,000.
Because a QCD is excluded from adjusted gross income entirely, it can keep you below thresholds that trigger higher Medicare premiums and reduce the taxable portion of your Social Security benefits. Retirees who take the standard deduction and wouldn’t itemize a charitable gift benefit most, because the QCD delivers a tax break a regular donation wouldn’t.
Watch Your Medicare Premium Thresholds
Every dollar of RMD income adds to your MAGI, and this is where reinvestment planning gets its sharpest edge. Medicare Part B and Part D premiums are adjusted based on your MAGI through the Income-Related Monthly Adjustment Amount, or IRMAA. Social Security uses your tax return from two years prior, so your 2024 income determines your 2026 premiums.8Medicare. 2026 Medicare Costs
For 2026, single filers with MAGI above $109,000 and joint filers above $218,000 start paying surcharges on top of the standard Part B premium. At the highest tier, the monthly IRMAA surcharge reaches $487 for Part B alone, plus an additional $91 for Part D.9Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles If your RMD pushes you over an IRMAA threshold, the surcharge applies to all twelve months of premiums for that year. Reinvestment strategy doesn’t change the RMD itself, but a QCD does reduce AGI directly, and Roth conversions done in earlier years can reduce future RMDs. That planning needs to happen well before age 73.
Handling Withholding When You Take the Distribution
When you request an RMD, your custodian will ask whether you want federal and state income tax withheld. Having enough withheld to cover the tax on the distribution keeps you from facing an underpayment penalty at filing time. Many retirees elect 10% to 20% federal withholding, though the right amount depends on your overall tax picture. If you’re planning to reinvest the full RMD, remember that whatever you withhold reduces the cash available to redeploy, so budget for the tax bill separately if you want the entire distribution working for you in a brokerage account or Roth.
One timing note for a QCD: coordinate with your IRA custodian early in the year. The charity must receive the funds before December 31 for the distribution to count toward that year’s RMD, and processing times vary.