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Retirees Have Until Dec. 31 to Take Their RMDs - Here’s How to Make That Cash Work for You

After the withdrawal, your next move is sorting taxes, bills, and leftover cash that could earn more while it waits.

Retired couple on laptop
Laura Hohenstein
Melinda Sineriz, ABFP®
By Laura Hohenstein , Edited by Melinda Sineriz, ABFP®
Updated Nov. 12, 2026
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Quick Read

  • $25,000 in high-yield savings at 4.00% annual percentage yield (APY) earns about $1,000 over one year, or about $83 a month.
  • The same $25,000 at the FDIC national average savings rate of 0.38% APY (as of 06/15/26) earns about $95 a year, or about $8 a month.
  • That's a gap of about $905 a year on RMD cash you might need soon, but not today.
  • At the national average savings rate of 0.38% (as of 06/15/26), $20,000 earns $76 a year. The same balance could earn up to nine times more with a SoFi Checking and Savings account. See SoFi®'s current rate.

A required minimum distribution (RMD) can feel like money with a timer on it. You know the retirement withdrawal has to happen, but the cash can land in an account where it sits out of habit.

For many required minimum distributions, Dec. 31 is the annual date to circle. But taking the RMD and spending the RMD are separate decisions, and the first account that receives the money doesn't have to be its long-term parking spot.

The useful move is simple: take the distribution on time, set aside the pieces that already belong to taxes and bills, and let suitable leftover cash earn while it waits. That makes the deadline less of a scramble and more of a cash checkup.

Take the RMD first

For most annual RMDs, the IRS deadline is Dec. 31. If 2026 is your first RMD year, the first-year rule could let you take that first distribution by April 1 of the following year, though that usually means a second RMD is due in the same calendar year. The costly mistake is missing the required withdrawal or taking too little: the IRS excise tax for a missed or insufficient RMD is 25%, and it can drop to 10% when the shortfall is corrected within the IRS correction window.

Once the distribution is taken, the retirement account requirement and the cash-management decision split apart. The money that lands in your bank or credit union account is cash you're able to sort by job, rather than cash that has to stay wherever it arrived.

Taxes come off the top

Before you treat the full RMD as spending money, give the tax piece first claim. Many distributions from traditional IRAs and workplace retirement plans are taxable, and the amount that feels available in December might look different once withholding and estimated tax payments enter the picture.

You could have federal income tax withheld from the distribution, or you might need estimated payments if withholding doesn't cover enough. The right number depends on your broader tax picture, but the cash-sorting rule is simpler: money that might be needed for taxes belongs in a safe, reachable bucket.

That tax bucket doesn't need drama. It just needs to stay visible, separate from grocery money and separate from cash you're trying to make work harder in a high-yield savings account.

Keep this month's cash close

Some RMD cash already has a short-term job. If the money is needed for rent or a mortgage, utilities, prescriptions, insurance premiums, credit card autopay, or groceries before the next statement cycle, keeping it in your everyday spending account can save you from chasing a transfer at the wrong moment.

A small timing cushion matters, too. If an automatic payment usually hits on the 28th, that money belongs where the payment pulls from, even if another account pays more interest.

The point is to avoid a preventable overdraft, late fee, or panicked transfer while the rest of the RMD gets sorted.

Put waiting cash to work

After taxes and near-term bills are covered, leftover RMD cash could have a better job than sitting in a low-yield account. A high-yield savings account paying 4.00% annual percentage yield (APY) earns about $1,000 over one year on $25,000.

The contrast makes the decision concrete. The same $25,000 at the FDIC national average savings rate of 0.38% APY (as of 06/15/26) earns about $95 over one year, using simple interest for the comparison.

That's about $905 more over 12 months, without putting the money into the stock market or locking it into a long commitment. The tradeoff is that a high-yield savings account is still a savings account: useful for cash that is waiting, less useful for money that needs to pay a bill at 9 a.m. tomorrow.

If you have One year at 0.38% APY (national average) One year at 3.80% APY (example) You are leaving behind
$10,000 $38 $380 $342
$25,000 $95 $950 $855
$40,000 $152 $1,520 $1,368
$50,000 $190 $1,900 $1,710
$100,000 $380 $3,800 $3,420

Not every dollar belongs here

The cleanest way to sort your RMD is to ask when each dollar has to be used. The answer might put the same distribution into three different places, and that's perfectly normal.

  • Keep money for this week or this month in the account that handles your spending.
  • Consider high-yield savings for tax money waiting for an upcoming payment, next year's living costs, annual insurance premiums, property taxes, planned repairs, or cash you want safe and reachable within months.
  • Look beyond high-yield savings for money already committed to a near closing, a medical bill due soon, or long-term growth over many years.

That last category matters. Cash meant for long-term growth might need a different conversation than savings yield, because high-yield savings is designed for safety and access rather than market growth.

Check the friction before transferring

A higher rate helps only if the account still works in real life. If the savings account is online, understanding how online savings accounts work helps you check the right details before moving RMD cash.

Start with transfer timing. Bank-to-bank ACH transfers commonly take one to three business days, so a separate savings account could be reachable in an emergency without being same-minute money in your checking account.

Then check safety and access terms in plain English:

  • Deposit insurance: FDIC insurance generally covers up to $250,000 per depositor, per insured bank, per ownership category, and NCUA coverage generally applies the same limit at federally insured credit unions.
  • Minimums and fees: Check whether a minimum balance, monthly fee, or transfer requirement applies before moving RMD cash.
  • Withdrawal options: Confirm how you'd move money back when a tax bill, insurance premium, or household expense comes due.
  • Rate check: If the APY drops, compare again before leaving a large cash balance there.

None of those checks has to stop you. They tell you whether the extra interest is worth the small amount of friction for the specific RMD dollars you're moving.

Bottom line

Your Dec. 31 RMD deadline starts the process, but it doesn't finish the cash decision. If $15,000 is left after taxes and immediate bills, a 4.00% APY earns about $600 over one year.

Take the RMD, reserve taxes and this month's bills, and let suitable leftover cash earn in high-yield savings while it waits.

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