A call came in called Robert The Clark Howard Show he had a problem that most savers would like to have: the IRS was forcing him to take money out of his retirement accounts, and he didn’t need a dime of it to pay his bills. Clark’s answer was short, vague, and mostly correct, with one big blind spot costing retirees thousands every year.
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I’ve been putting together retirement income planning for more than 15 years, and the RMD reinvestment question is one of the most common – and most confusing – calls I hear in personal finance. Here is an exchange from the February 7, 2018 broadcast. After Robert explained that he was over 70.5, splitting his required minimum distributions across all three accounts, and holding about $500,000, Clark told him:
“If you don’t want to give it to family or charity or you don’t want to do something fun for yourself and you don’t need the money. This is going to sound weird. I’d put it in an investment account and buy like a total stock market index fund or something like that. Eventually there’s going to be a big legacy for someone to come down the road.”
Verdict: Reinstall, But Choose Your Wrapper Carefully
Clark’s instinct is right. The RMD you don’t need must go back to work instead of being lost to inflation in the checking account. Mechanic Robert and all retirees in his shoes need to understand the difference between a tax-deferred account and a taxable merchant account, because the RMD is the bridge between them.
When you withdraw money from a traditional IRA or 401(k), every dollar comes on your tax return as ordinary income. For a 2026 married couple filing jointly, that income stacks up on top of Social Security and pension dollars and tops out at the 22% bracket. A tax bill is owed whether you spend the cash at the store or let it sit in a savings account earning 4%.
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Once you’ve paid that regular tax, redeploying it to a regular taxable brokerage account is a move. Within that account, the broad index fund issues qualified dividends and long-term capital gains, both of which are taxed at special rates. The goal is to move money from a tax-deferred bracket to a tax-adjusted bracket. That is the second layer that Robert needs.
Running the Numbers with a $20,000 RMD
Say Robert’s combined RMD is $20,000 and his marginal bracket is 22%. You owe about $4,400 in federal taxes no matter what. The remaining $15,600, which is reduced to a market index fund, can compound over the years and pass to heirs on a cost-effective basis at death. Unrealized benefits accumulated by the fund during his lifetime are wiped out in full in the next generation.
Compare that to leaving $15,600 in a high-yield savings account. The interest is taxed as ordinary income every year, and the principal does not grow above the rate the bank pays. In ten years, the gap between the two one-year RMD strategies can easily run into five figures.
The Variable That Changes Everything: Are You Giving?
Here’s where Clark sold the game. If Robert gives to a church, alma mater, or any 501(c)(3), he can use a Qualified Charitable Distribution to send up to $108,000 (2025 limit, shown annually) from his IRA to charity. The dollars satisfy his RMD and never appear on his tax bill at all.
That’s a lot better than taking an RMD, paying 22% tax, and writing a check. With the standard deduction for 2026 at $29,200, many retirees are no longer itemizing, meaning that a regular charitable contribution receives no tax benefit. QCD bypasses the standard deduction trap entirely.
Clark talked about the family giving channel, and that paddle is still working. The annual gift exclusion for 2026 is $19,000, which means Robert and his spouse can give $38,000 to each child or adult grandchild annually with zero gift tax filings. The catch: you still pay income tax on the RMD before you donate. QCD does not have that drag.
What Robert (and you) Should Do Actually
Verify your RMD age. The 70.5 limit on Robert’s 2018 call is gone. Under SECURE 2.0, the trigger is now 73 years, moving to 75 in 2033. If you turn 73 this year, your first RMD is due on April 1 of the next year.
Pull on the bond side of the portfolio. Clark told Robert to take distributions from the lower portion of his accounts variable so that the equity concentration would remain the same. The same concept applies to you.
If you contribute, use QCD first. Call your IRA custodian and ask them to cut a check directly to the charity. Do it before December to count for the current tax year.
Return the rest to a taxable brokerage account. A total stock market index fund or tax-advantaged equivalent keeps the annual tax deduction close to zero and gives heirs a step-up basis.
Consider automatic monthly RMDs for your caregiver. Schwab, Fidelity, and Vanguard will calculate and distribute the appropriate amount each month, spreading market timing risk throughout the year.
Clark’s core answer to Robert stands out: don’t let forced withdrawals turn into idle cash. The refinement is that the smartest dollar of an unclaimed RMD goes to help with QCD, subsequent dollars go into a low-cost index fund within a taxable brokerage, and the legacy Clark described takes care of itself.
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