Are you treating your Required Minimum Distribution like “free money”? That mistake could cost you more than you realize.

Every year, millions of retirees take their Required Minimum Distribution (RMD) because the IRS says they have to. Too often, that money ends up getting spent simply because it’s sitting in a checking account. Your RMD isn’t a bonus. It’s part of your retirement plan.

The amount you’re required to withdraw is based on your retirement account balance and an IRS life expectancy factor. Since your account balance plays a role, planning ahead can make a real difference over time.

The bigger question is this, what happens after the money leaves your retirement account? If you don’t actually need the cash for everyday living, don’t let it quietly disappear on impulse purchases.

Instead, consider giving your RMD a purpose. Reinvest it in a taxable brokerage account. Pay off high-interest debt. Build up your emergency or home repair fund. If charitable giving is important to you, a Qualified Charitable Distribution (QCD) may help reduce your taxable income while supporting a cause you care about.

Remember, your RMD can also affect your taxes and even your Medicare premiums, so it’s worth planning instead of waiting until the last minute.

Here’s what I do.

When I take my RMD, I move it into my high-interest money market account. Some of it gets spent over time, but most of it stays there until I have a specific purpose for it.

Last year, after letting those RMD withdrawals accumulate over several years, I used the money to help pay for a home remodel. Because I had a plan, I didn’t have to dip into my emergency fund or rely on credit cards.

Sometimes the smartest financial decision isn’t finding more money, it’s giving the money you already have a job before you spend it.

What do you do with your RMD? Spend it, save it, invest it, or something else? Let me know in the comments! And if you’re looking for practical retirement and personal finance tips without the jargon, follow my page for more.