Q: I turned 73 this year and I must begin withdrawing Required Minimum Distributions (RMD) from my IRA. My pension and Social Security benefits cover my living costs. Can I put my (after-tax) RMD funds back into my IRA?
A: No, you can’t. But you can still save and invest the funds. To keep the money growing, consider reinvesting the proceeds from the RMD in taxable accounts, such as a high-yield savings account at an online bank, or in mutual funds or ETFs at a brokerage firm.
Another option is contributing to a Roth IRA. If you are still working, you can contribute up to $8,000 in a Roth IRA if your adjusted gross income is less than $153,000 (single) or $228,000 (married). Since a Roth IRA is taxed upfront, you won’t owe tax on withdrawals. And there are no RMDs on Roth IRAs.
After you have withdrawn your RMD, you can convert part of your traditional IRA to a Roth IRA. The amount you convert is taxed so you can pay the taxes with the money you receive from your RMD. Whatever you do, remember to take your RMD each year before December 31. If you skip it, you’ll incur a hefty penalty.
