Retirees Can Cut Tax on $20,000 RMDs by Using QCDs or Taxable Index Funds
Updated
Updated · 24/7 Wall St. · Jun 27
Retirees Can Cut Tax on $20,000 RMDs by Using QCDs or Taxable Index Funds
3 articles · Updated · 24/7 Wall St. · Jun 27
Summary
$20,000 of unwanted RMDs should not sit in cash: after paying roughly $4,400 in federal tax at a 22% bracket, retirees can reinvest the remaining $15,600 in a taxable brokerage account.
Taxable index funds are favored because qualified dividends and long-term gains get preferential tax treatment, unlike high-yield savings interest taxed annually as ordinary income.
$108,000 of IRA money can go directly to charity through a Qualified Charitable Distribution, satisfying the RMD without ever appearing on the tax return — often better than donating after withdrawal.
RMD rules have changed since the 2018 call: the starting age is now 73 under SECURE 2.0, rising to 75 in 2033, with a first withdrawal due by April 1 of the following year.
$19,000 remains the 2026 annual gift exclusion per recipient, but gifting still comes after RMD income tax is paid, making QCDs the cleaner option for charitable retirees.