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Before you take your Required Minimum Distribution (RMD), it’s a good idea to plan ahead for what you’re going to do with the money, because once you take it out of your IRA, you usually can’t return it.
According to Ali Dhanji, a financial advisor at Raymond James & Associates, “Once you’ve taken your Required Minimum Distribution from your IRA, it’s like toothpaste out of the tube–you generally can’t put it back in. The IRS designed these distributions to eventually be taxed, not returned to tax-sheltered accounts.”
Key Takeaways
- Once you take your RMD out of your IRA, you can’t deposit the money back in again.
- RMDs are considered taxable income and cannot be rolled over or redeposited into a tax-advantaged retirement account.
- Plan ahead for what to do with your RMD, whether it’s using it towards everyday living expenses, investing it, giving it to a charitable cause or a family member, or making a Roth IRA contribution.
What Are the RMD Rules?
By law, retirees must start taking RMDs from traditional IRAs and other qualified retirement plans starting at age 73 (as of 2025). These withdrawals are taxable income and the IRS expects you to take them, whether you need the money or not.
“Once an RMD is distributed, it’s considered taxable income and can’t be rolled over or redeposited,” says Jason Bryan Ball, CFP and financial educator. “Even if someone takes their RMD early in the year and realizes they didn’t need it, there’s no standard way to reverse it under current IRS rules.”
That’s because the purpose of RMDs is to force funds out of tax-deferred status so they can be taxed. For this reason, RMDs are excluded from the typical 60-day rollover window that applies to other IRA distributions.
Ball warns that some investors mistakenly believe they can “undo” an RMD by rolling it over, particularly when taking distributions early in the year and later realizing they didn’t need the funds, but in his words, “The tax code does not offer that flexibility.”
Fast Fact
Rare exceptions to this rule have been made in the past. “In 2020, the CARES Act temporarily waived RMDs due to the pandemic, and individuals who had already taken an RMD were allowed to roll it back into an IRA. But that was a one-time relief event—and outside of special IRS waivers or extraordinary circumstances, the rule is firm, Ball said.”
Penalties for Missing Your RMD
Failing to take your RMD carries steep consequences: a 25% excise tax on the amount you were supposed to withdraw and didn’t. That’s why it’s critical to:
- Know your RMD amount each year
- Take the full required amount by the deadline (typically December 31)
- Speak with a financial advisor to ensure compliance
What Can You Do With Your RMD?
RMD funds can be used for everyday living expenses, but if those are covered already, Dhanji offers a few recommendations for what to do with the money:
- Invest it in a regular (taxable) brokerage account
- Use it for a Qualified Charitable Distribution if charitable giving is important to you
- Gift some to family members (within annual gift tax limits)
- Explore a Roth conversion for future withdrawals (however, keep in mind that this doesn’t replace your current RMD)
Dhanji also recommends speaking with a financial advisor or tax professional about how to best use your RMD as part of your overall retirement income strategy.
The Bottom Line
In the words of the IRS, “You cannot keep retirement funds in your account indefinitely,” and the RMD system is certainly designed that way. Once you take your RMD from your IRA, you can’t put it back in.
Planning in advance for how you’ll use these funds is essential, whether for expenses, family support, charitable giving, or investing. Thoughtful RMD planning can help you minimize taxes and make the most of your retirement income.
