HYSA Q&A Author: Hans Goldstein, NPN 20602398 Last updated: 2026-06-27

Should I Keep RMD in a HYSA?

TL;DR

Yes for current-year living expenses; that's exactly what cash is for. But parking the full RMD long-term in a HYSA means losing real value to inflation while paying tax annually on the interest. The smarter play is taking a MYGA inside the IRA before RMD age (73) to lock the rate before forced distribution starts, then drawing only what you need each year. RMD must come out annually; how you redeploy what you don't spend is the real question.

The short answer

Yes for the portion you will spend in the current year. A HYSA is exactly the right tool for cash flow you need within 12 months — instant liquidity, FDIC-insured, decent yield. Take the RMD, deposit it to your HYSA, draw monthly for living expenses, done.

No for the portion you do not need to spend. If your RMD is $40,000 and your actual spending need from the IRA is $25,000, the extra $15,000 should not sit in a HYSA earning 4.0-4.3% taxable. After tax and inflation, the real return on excess HYSA cash is essentially zero. Reinvest the excess in a non-qualified MYGA, a brokerage account with stocks and bonds, or even back into a Roth IRA via conversion in a low-bracket year.

The RMD basics that matter here

RMDs (required minimum distributions) start at age 73 for traditional IRAs and 401(k)s. The IRS publishes a Uniform Lifetime Table that sets the divisor for your age. RMD = prior-year-end account balance / table divisor. Example: age 73 divisor is 26.5, so a $500K IRA produces a $18,868 RMD that year.

The RMD must be distributed to a non-IRA account by December 31 (April 1 for the first RMD year only). Failure to distribute triggers a 25% excise tax on the missed amount (reduced to 10% if corrected within 2 years). Once distributed, the money is yours to spend, save, reinvest — the IRS does not care what you do with it.

The interesting question is not "do I take it" (you must) but "where does it land and what do I do with it."

Worked example: $60K RMD, $40K spending need

Robert is 75. IRA balance $750K. RMD this year: ~$30,500 (75 divisor is 24.6). With Social Security, he needs $25,000 from the IRA for living expenses; the other $5,500 is surplus.

Strategy	Year-1 outcome on $5,500 surplus	3-yr outcome (rate held)
Sit in HYSA at 4.25%	$234 interest, $56 tax, $178 net	~$715 net interest, real value declining by inflation
Move to non-qualified MYGA at 5.30%	$292 interest, $0 tax (deferred)	~$893 net interest, real value modestly positive
Reinvest in brokerage (60/40 stocks/bonds)	Variable, ~$385 expected	~$1,150 expected (with volatility)
Roth conversion (if bracket allows)	$0 net first year, but $5,500 grows tax-free forever after	Tax-free compounding indefinitely

On $5,500/year of surplus, the absolute dollar differences are small. On 5-10 years of accumulated surpluses ($30K-$60K), the strategy gap becomes material.

The pre-RMD MYGA play

The smarter move starts before RMD age. If you are 65-72 and have an IRA you do not need for current spending, opening a non-qualified MYGA inside the IRA locks today's rate for 3-10 years. When RMDs start at 73, you simply take the required distribution from the MYGA each year (the carrier will set up the systematic RMD distribution for you).

Why this matters: today's 5.30% MYGA rate is locked. If you wait until 73 and start taking RMDs from cash inside the IRA, you are committing to whatever HYSA-equivalent rate prevails in 8 years (probably lower — long-term cash yields trend down). The MYGA pre-RMD lock-in protects you from that.

Mechanics: Most A-rated MYGAs accept IRA money via trustee-to-trustee transfer. The carrier sets up a 10% annual penalty-free withdrawal that covers the typical 4-5% RMD requirement. The contract continues to credit the locked rate on the remaining balance.

The inflation problem with long-term HYSA cash

4.25% APY sounds good. After 24% federal + 9.3% state tax, it is 2.85% after-tax. Net of 3% inflation, the real after-tax return is essentially zero. Holding $200K of post-RMD surplus in a HYSA for 10 years preserves the nominal $200K but produces about $14K of real (inflation-adjusted) growth — less than 1% per year real.

That is the cost of treating excess RMD cash as "savings." It is not savings; it is dead capital eroding to inflation.

When the answer changes

You will spend it within 12 months. HYSA is correct. Do not over-engineer current-year cash flow.
You are in a 0 or 12% bracket. Roth conversions become a powerful alternative to HYSA-parking the surplus. Convert at low brackets to lock in tax-free growth forever.
You have an estate-planning beneficiary plan. Naming beneficiaries on a MYGA passes the contract outside probate to the named beneficiary; HYSA passes via POD or estate. MYGA estate mechanics are usually cleaner.
You have a charitable giving plan. The Qualified Charitable Distribution (QCD) lets you donate up to $108,000 (2026 limit) directly from the IRA to a 501(c)(3), satisfying the RMD without it counting as income. This is dramatically better than donating from HYSA cash.

The QCD alternative

If you donate to charity anyway, the Qualified Charitable Distribution is almost always better than taking the RMD to HYSA and then writing a check. QCD lets you transfer up to $108,000/year directly from your traditional IRA to a qualified 501(c)(3). The transfer counts toward your RMD but is not taxable income. It also does not push you into higher IRMAA tiers for Medicare premiums.

Mechanics: contact your IRA custodian, request a check made payable directly to the charity, sent to your address. You deliver the check to the charity. The custodian reports it as a distribution but you exclude the QCD portion on Form 1040.

Common mistakes

Treating the full RMD as untouchable cash reserves. Once distributed, it's yours to deploy. Only what you spend this year needs to be in cash.
Forgetting the December 31 deadline. Missing the RMD triggers a 25% excise tax. Set a September reminder to confirm the distribution is in process.
Taking the RMD in cash when QCD-eligible donations are part of your spending. QCD bypasses the income recognition entirely. Highly tax-efficient for charitable givers.
Sitting on the full RMD because "I might need it." Cash held against vague future needs is the most expensive form of cash. Decide a 12-month spending number; everything above that goes to longer-duration instruments.
Putting RMD surplus in a 5-year MYGA without considering brokerage equities. If your horizon is 5+ years and you can tolerate volatility, equities have historically outperformed MYGAs by 3-5% per year over rolling 10-year windows. MYGAs are right for medium duration; long-duration surplus often belongs in stocks.

What to do next

If you are over 73, calculate: this year's RMD, your actual 12-month spending need from the IRA, and the surplus. The surplus is what needs to be redeployed out of HYSA into a higher-real-return instrument (non-qualified MYGA, brokerage, Roth conversion, QCD).

If you are 65-72, the bigger opportunity is the pre-RMD MYGA play. Locking the 5.30% rate today and structuring the contract for systematic RMD distribution starting at 73 protects you from 8 years of potential rate decline. See CD vs MYGA ladder and HYSA vs MYGA for 3-year money.

Frequently asked follow-up questions

Do I have to spend my entire RMD in the year I take it?

No. The IRS requires distribution from the IRA by the deadline, not that you spend it. Once distributed, you can save it, reinvest it, donate it, or give it to family. The tax is owed on the distribution regardless of what you then do with the money.

Can I roll my RMD into a Roth IRA?

No. Once distributed, the RMD is not eligible for rollover into another tax-advantaged account. You can, however, contribute to a Roth IRA from non-RMD earned income if you have it, or do a Roth conversion of additional IRA dollars beyond the RMD.

What if I don't need the RMD for spending?

You still have to take it (or use a QCD to satisfy it via charity). Common redeployment options for unwanted RMD cash: non-qualified MYGA for income certainty, brokerage account for long-term growth, 529 plan for grandchild education, or simply gifting to family within the annual exclusion ($19K/recipient in 2026).

Is the RMD calculation different in the first year?

First-year RMDs (the year you turn 73) can be deferred to April 1 of the following year. Doing so means taking two RMDs in that following year, which often pushes you into a higher bracket. Most people take the first RMD in the year they turn 73 to avoid the bunching.

Should I take the RMD all at once or monthly?

Monthly works for predictable cash flow. Annual works if you want to control the timing for tax-loss harvesting or other planning. The IRS does not care about distribution timing as long as the total RMD is met by December 31.

How does a QCD interact with the RMD?

A QCD counts toward satisfying the RMD up to the QCD amount ($108K limit for 2026). If your RMD is $40K and you do a $30K QCD, you only need to take $10K as a taxable distribution to complete the RMD.

Can I take more than my RMD?

Yes. The RMD is a floor, not a ceiling. You can distribute more if you want; the extra is also taxable. Common reason to do so: managing tax brackets across multiple years, or filling a low-bracket year before tax law changes.

Want help structuring your RMD strategy across HYSA, MYGA, and Roth?

I'm a licensed independent producer (NPN 20602398) appointed with multiple A-rated carriers. If you're 65-75 and managing an IRA with current or upcoming RMDs, I'll lay out a multi-year structure that minimizes tax and maximizes locked yield.

No cost, no obligation. Written second opinion within 24 hours.

Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed producer

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Disclosure

This article reflects publicly available HYSA, CD, and annuity rate information approximate to the date above. High-yield savings rates are variable and change frequently — often weekly. Always confirm current rates directly with the institution before opening or transferring. This is general educational content, not a personalized recommendation, solicitation, or offer of any specific product. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated carriers in the fixed-annuity market; Goldstein & Co. LLC is not a bank, broker-dealer, or registered investment adviser. HYSAs and CDs are deposit products of FDIC-insured banks or NCUA-insured credit unions; MYGAs and other annuities are insurance contracts backed by the issuing carrier and state guaranty associations. FDIC and NCUA insurance limits are typically $250,000 per depositor per institution per ownership category. Tax discussion reflects federal law as of 2026 and is subject to change; consult a tax professional for your situation.