Over 73 and Sitting on IRA Cash? Discover the Smart Moves That Could Transform Your Financial Future—You Won’t Believe What You Should Do Next!

So, you’ve hit 73 or beyond, and suddenly your Individual Retirement Account (IRA) is calling your name—demanding you take money out, whether you want to or not. Sounds like a bummer, right? But hang on—what if I told you that this mandatory withdrawal, known in the IRS lingo as the Required Minimum Distribution (RMD), isn’t just a hassle but can actually open some interesting doors? Yeah, it’s the government’s way of making sure you’re paying your fair share of taxes—but once you’ve made the withdrawal, what do you do with cold, hard cash you don’t really need? Tossing it under the mattress? Hell no. We’re talking smart moves—like helping others, saving for education, paying off debts, or yes, even splurging a little on that getaway you’ve been dreaming of. Trust me, understanding why these RMDs happen and how to handle them is like mastering a new muscle—it sets you up for long-term gains. Let me break it all down for you—gear up, because this info could seriously pump up your retirement game. LEARN MORE

If you’re over 73 years old, you’re aware that every now and then, you must make a required withdrawal from your Individual Retirement Account (IRA). Sometimes, though, when you do, you might find yourself with money that you don’t need. Below, we break down why exactly these withdrawals happen and what you can do with the money when you don’t need it to help fund your day-to-day life. Read on for more. 

What are IRA required minimum distributions (RMDs)

If you are over the age of 73 and have a traditional IRA, a Simplified Employee Pension (SEP) IRA or a Savings Incentive Match Plan for Employees (SIMPLE) IRA account, the Internal Revenue Service (IRS) makes you withdraw a certain amount of money every year from your account. They call it a Required Minimum Distribution (RMD), and this year, the first withdrawal was due by April 1, and the second is due by December 31. 

The amount owed does vary from person to person and is determined by dividing your IRA balance from December of the previous year by the life expectancy factor decided on by the IRS, and is determined by a variety of factors, such as whether you’re married and who’s the sole beneficiary on the account. You can view the full breakdown here. 

Not all retirees are required to make a withdrawal, though. According to the IRS, “Roth IRA owners are not required to take withdrawals during their lifetime; however, beneficiaries are subject to the RMD rules after the account owner’s death.” 

Why the IRS requires retirement withdrawals

The reason for the required withdrawals is to ensure that the United States government and the IRS can make sure that the individuals using a retirement account are still paying their taxes. 

And if you don’t withdraw the money, the IRS warns that you then become “subject to a 25% excise tax on the amount not withdrawn. The 25% excise tax rate is reduced to 10% if the error is corrected within two years.” 

Smart ways to use your RMDs if you don’t need the cash

After you make your required withdrawal and realize that you don’t need the money, there are several things you can do. 

The first is to give the money to a charity you care about. They call it a qualified charitable distribution (QCD), and it happens when you decide to transfer the money directly from your retirement account to a charity of your choice. As of publication, the maximum donation you can give us is $108,000. 

“It’s the IRS’s best-kept secret for retirees,” Ashton Lawrence, a Certified Financial Planner at Mariner Wealth Advisors, told CNBC. “Skip the tax bill and help a cause you believe in.”

Another option is to put the money in a 529 college savings plan for someone you care about. Currently, there is no federal tax break available for this option; however, several states across the country do offer one. 

You can also use the money to help pay off your debts and loans, ensuring that those things aren’t hanging over your head. 

And of course, if all else fails and you would rather spend the money in a fun way, we recommend either taking a long—and probably—much needed vacation, going on a shopping spree or investing in something that can be passed down to your family like stocks or real estate—the latter of which you can rent out opening you up to a brand new set of tax deductibles. 

“If you receive rental income from the rental of a dwelling unit, there are certain rental expenses you may deduct on your tax return,” reads the IRS website. “These expenses may include mortgage interest, property tax, operating expenses, depreciation and repairs.” 

For more on these tax breaks and to learn what exactly qualifies as a debatable, click here.