Maximizing Retirement Income: Advanced Strategies for High-Net-Worth Retirees

By Kris Maksimovich, CPFA®, CRC®, CRPC®, Wealth Manager and Partner and Chris Powers Chris Powers, CFP®, AEP®, Wealth Manager and Partner

Retirement is on everyone’s horizon, but the high-net-worth (HNW) are doing things differently. For them, it’s not just about stopping work but creating freedom and work optionality in their later years. 

Given this unique approach to work and retirement, high-net-worth individuals also plan differently. Instead of focusing solely on income replacement, they actively manage complex financial risks—such as tax liability, market volatility, long-term care costs, and estate planning—to ensure their money continues to work for them during their later years and beyond. This calls for comprehensive tax, investment, and estate planning strategies coordinated by skilled financial planners working in concert with other professionals, like CPAs and attorneys.   

If you are a high-net-worth individual approaching retirement and want to ensure you are on the right path, continue reading for our recommendations.

The 10-Year Window: Why It’s Time to Get off Autopilot

While planning for retirement is always important, the years just before and after retirement can be especially crucial. At the core of this phase is creating tax efficiency, ideally spanning the five years before and after retiring, making it a valuable ten-year window. By collaborating with CPAs and estate attorneys, financial advisors can stress-test your portfolio against a wide range of scenarios, including market fluctuations, business ownership risks, changes in tax law, soaring inflation, health conditions and longevity. This process is often eye-opening, signaling a shift from prioritizing growth to focusing on tax reduction.

Take action now if your plan has been on autopilot. Holding on to concentrated stock positions to avoid long-term capital gains tax? Use tax-efficient swap or replacement strategies that generate tax-loss without reducing your participation in market upside. 

This challenge is particularly relevant for those holding large equity positions in newly successful tech company IPOs. At some stage, you must decide how much you are willing to pay in taxes when you cash out if you do not have something like the above to offset it.

For those who are self-employed, consider the sharp contrast between planning your exit years in advance and bringing your advisory team in only months before selling.  Allowing yourself and your team time to coordinate planning can save millions of dollars in tax and position the transfer of your wealth to your heirs in a similar tax-friendly manner. Ultimately, successful planning involves balancing ego with strategic decision-making. Remember, relinquishing control over assets like a business or stocks may feel like a loss of identity, but the greatest loss of control happens when you fail to plan and inadvertently limit your tax choices. Choose your loss of control.

What are the most relevant tax strategies for HNW retirees?

Instead of searching for extra deductions, it’s critical for high-net-worth individuals to focus on structuring income, assets, and gifting strategies. At a high level, typical focus areas include; simple charitable structures like Donor Advised Funds to the more advanced Family Foundation.   Transfer of assets to a family partnership could reduce the value of the underlying assets for the purposes of estate tax. Reviewing your portfolio for unused income generation in a taxable account and determining if a Roth Conversion makes sense. 

Continuing with tax-advantaged planning, if you are eligible for a Health Savings Account, it makes sense to fully fund it each year. Given its potential triple tax advantage, this is one area you likely won’t regret prioritizing.

Shifting to government benefits, Social Security requires strategic consideration. If you postpone claiming benefits, your benefit will increase by eight percent per year. This can also be important in the event a higher wage-earning spouse pre-deceases the other, since only the larger of the two individual benefit amounts will be paid to the surviving spouse. Additionally, the Ordinary Income caused by Social Security benefits may reduce one’s ability to convert tax-deferred IRAs to Roth, while in a lower tax bracket- a very important caveat to consider.

Qualified Charitable Distributions are another valuable strategy. When eligible at age 70.5, individuals can make gifts from a retirement account directly to charity, so the distribution is not included as ordinary income and is not taxed.  

Superfunding a child’s 529 education plan can be a multigenerational tax and estate planning tool as well.

Regardless of the strategies you employ, always keep beneficiaries and legal documents up to date to avoid mistakes in asset transfer.

What common mistakes do HNW retirees make?

Many high-net-worth retirees with significant tax-deferred savings may face a higher tax bracket than expected. Starting at age 73, required minimum distributions (RMDs) create additional taxable income each year, which can also increase Medicare premiums.

A sound tax plan should account for the impact of RMDs and whether Roth conversions can help preserve more of your savings. The opportunity to benefit from this strategy narrows as you approach age 73. Because RMDs cannot be converted to a Roth account, the value of Roth conversions generally declines once those distributions begin.

Another common mistake is failing to plan years in advance for a liquidity event, such as the sale of a business, real estate, or another appreciated asset. Capital gains taxes and, in the case of real estate, depreciation recapture, can significantly reduce proceeds. Tax-efficient strategies, including active tax-loss harvesting, can help offset the impact, and unused losses can be carried forward until they are fully used. As previously mentioned, these strategies can be implemented without giving up market returns. These approaches are most effective when implemented well before the year of the sale.

Leaving a legacy to children and grandchildren is a common goal, but many retirees lack a dedicated investment strategy for it. High-net-worth retirees often prefer portfolios that emphasize income, liquidity, and stability, while assets set aside for legacy planning typically have a longer time horizon and can prioritize growth over liquidity and stability.

High-net-worth retirees often neglect long-term care planning. Ask whether you’ll rely on your children or self-fund long-term care expenses. If self-funding isn’t an option due to illiquidity or there’s a risk of spending down assets beyond what’s needed to self-fund, consider a long-term care hybrid policy that returns premiums as a death benefit if the long-term care benefit isn’t used.  

Staying informed about current events is crucial—especially as historical increases in taxes often follow periods of rising national debt. Consistent learning from history can strengthen your financial decisions.

Finally, keeping beneficiaries and estate plans up to date remains critical. The misconception that a completed will is sufficient persists; remember, it only covers assets that are a part of your probate estate. Work closely with your wealth advisor to ensure comprehensive planning.

Stay Engaged and Active to Reap the Biggest Rewards in Retirement

The principles that helped you excel at work will serve you in retirement. Maintain discipline in planning, stay informed, give back creatively, and collaborate with professionals to enjoy your sunset years at your own pace.

Curious about how to maximize your retirement potential? Merit Financial Advisors offers complimentary consultations to help bring clarity and structure to your financial life. Let’s start the conversation today.