If you’re in a terrific position where you have millions of dollars put away for retirement, the first thing you should do is remember to be grateful. The second thing you should do is start considering some of the impacts and worries of being among the wealthiest Americans. This includes planning your estate, protecting your assets, and hiring a financial advisor.
This post was updated to clarify estate tax calculation, estate tax rates, irrevocable trusts vs. revocable trusts, rules of Roth IRA withdrawals, reinvestment of RMDs, LLC and trust protection, typical advisor fees, and that family office is only practical for $100 M+ wealth.
Estate Taxes and Legacy Planning
One of the most important things to know about your millions is estate taxes. To be more specific, it’s about who pays and how much. In 2024, estates valued over $13.61 million per person (or $27.22 million per married couple) are subject to federal estate tax on the excess amount. In these cases, heirs could see up to 40% in federal estate tax on the taxable portion above the exemption, though most estates pay much less after deductions.
One way to mitigate this potential scenario is to consider gifting strategies. In 2024, you can give up to $18,000 per person per year without reporting anything to the IRS. A married couple could receive $36,000 from the same person without tax concerns.
The other major move you can make regarding planning for your legacy is to create a trust. Not only are there tax benefits for reducing what your inheritors will owe, but you can also specify exactly how much they get, when, and if any stipulations are necessary to receive all the money. (Certain irrevocable trusts can reduce estate taxes, while revocable trusts mainly help with asset control and probate avoidance.)
Tax-Efficient Withdrawal Strategies
Here’s the thing with tax-efficient withdrawal strategies: Every financial advisor will give you different advice. However, the bottom line is that how you draw from your millions during retirement can have different tax implications.
One of the best ways to minimize your tax bill at the end of the year is to take an annual withdrawal from your accounts. You can adjust your withdrawal percentage based on your overall savings, but it’s been a favorite method of millionaires for years. Many retirees follow structured withdrawal strategies — such as the 4% rule or tax-optimized withdrawals — to maintain income stability and manage taxes.
Additionally, qualified withdrawals from a Roth IRA (after age 59½ and five years) are tax-free. Earlier withdrawals may incur taxes or penalties.
If you have a Required Minimum Distribution (RMD) you have to make every year, think about what you will do with this money. You can spend your RMDs, donate them (as a qualified charitable distribution), or reinvest them in a taxable brokerage account (though not back into an IRA).
Asset Protection
Unfortunately, high-net-worth individuals can be the targets of lawsuits for various reasons, sometimes only for frivolous purposes. To protect against this type of action, having an umbrella liability insurance policy can help protect you against any personal liabilities.
Additionally, you can build a layer of protection through a trust or LLC. Forming an LLC might help you create even more separation between your personal assets and business assets. In any case, this would help limit the amount of personal liability you have in a lawsuit. (Note that an LLC protects your personal assets from liabilities tied to your business, but not from personal lawsuits or debts.)
Lastly, set up an irrevocable asset-protection trust, as this will offer significant protection from creditors and lawsuits. The same goes for prenuptial agreements, as they can protect any wealth that might be inherited.
Health Care Costs
While Income-related Monthly Adjustment Amount (IRMAA) surcharges raise Medicare premiums for higher-income retirees, long-term care remains a much greater potential expense. Being mindful of your health care expenses is a must as this is easily one of the biggest factors that can chip away at wealth in the golden years.
Ultimately, you can pay out-of-pocket or go through private insurance. Still, private insurance can also be very expensive for seniors and people over a certain age due to increased health risks. This is especially true for long-term care, where things like in-home care or nursing homes can easily surpass the six-figure mark annually.
Financial Advisor and Wealth Management Fees
It should come as no surprise that having someone manage a large portfolio comes at a cost. Many financial advisors, especially those at bigger firms like Morgan Stanley or Merril Lynch, charge a percentage of assets under management. Most financial advisors charge between 0.25% and 1% of assets under management, though full-service wealth managers may charge more.
Family offices are suitable for ultra-high-net-worth households (typically $100 million or more) seeking full-time management, but this does not apply to most retirees.
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