10 Tax Planning Strategies for High Net Worth Individuals

On this episode of A Wiser Retirement Podcast, Casey Smith, Brad Lyons, CFP®, and guest Jordan Sute, CPA, give a quick market update. They also talk about 10 tax planning strategies for high-net-worth individuals.

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As we reach the one-year mark of the war in Ukraine we think of all the lives lost during this period. Unfortunately, the effects of the war have been felt all over the globe. Inflation, supply chain issues, and energy prices have also affected the financial services industry. However, the hope is that the war will soon end, and looking back this will have been a short-term strain on our economy. 

Don’t Buy Annuities

With all the uncertainty in these times, many people try to create certainty in one way or another. Buying annuities may sound like that kind of assurance to some. In general, annuities pay high interest on the money invested upfront, but on the other hand, the money needs to stay in that account for years (usually 10 to 14 years). This makes it not a wise investment since investing in the stock market can generate more interest revenue over the same period of time. Additionally, annuities don’t make a good inheritance because of tax implications. 

Consequently, when making investments it’s essential to have a holistic view, instead of investing to get the biggest return as soon as possible. A comprehensive approach to investing your money would be to analyze the short-term and long-term benefits and consequences of that investment in your financial plan and most importantly consider tax implications. This is true for anyone who plans to invest, but especially for those with a high net worth (5 to 10 million dollars). Usually, a high-net-worth individual has more complex tax issues. For this reason, we talked about 10 tax planning strategies for high-net-worth individuals:

1- Manage Your Investments Tax-wise

Fixed-income securities issued by the government are taxed preferentially when income taxes are filled. Municipal bonds are federal tax-free. This is done to keep the government’s borrowing low. At a municipal level, many of these municipal bonds are offered with guaranteed repayment. Municipal bonds should be part of an overall plan, and evaluated case by case.

2- Convert IRA to Roth

Converting an IRA to a Roth IRA is a great tax-planning strategy, that can be very beneficial. However, it can also hurt. So, it’s important to be attentive to which tax bracket you are in, and also take into consideration a possible future tax bracket.

3- Contribute to 529 Plans

For those in the high marginal brackets, using a 529 to save for kids’ college, can be a great strategy. This allows for saving without paying high taxes, and it can be done by parents or grandparents. Additionally, if you don’t use your 529 you can roll it over to a Roth account.

4- Max Out Your 401K

In many cases there are ways to invest in your 401K past the limit amount (which is approximately $22,500 for 2023), it’s important to understand your company’s policy, and if you are allowed to, invest as much as you can in your 401K.

5- Max out an HSA

HSA is a Health Savings account. In 2023 you can deposit $700 a year, that’s tax-free. If you don’t use this money for health expenses now, you can use it tax-free during retirement.

6- Invest in Real Estate (1031 Exchange)

If you’re selling an investment property and buying another one you should do a 1031 exchange. This strategy needs to be very well planned out before the selling agreement, or else it cannot be used.

7- Increase Your Giving

This is an itemized deduction. If you are married and your itemized deduction is below $25,000, it doesn’t help much with tax deductions. However, if you are retired and have RMDs, your donations should be given out of your IRA because those come right out of your IRA tax deductions.

8- Give Items of Value

People can donate things of value to charity and get a deduction from their tax returns. Those items could be, expensive bottles of liquor, gold coins, etc. Goodwill donations can also sometimes be included in those deductions.

9- Start a Donor Advised Fund

When you are reaching retirement, and you know it’s maybe your last high income year, you should consider contributing to a donor-advised fund. If you put assets in a donor advised fund, you can get the tax deductions for that in the same tax cycles, and then spread the donations out however you’d like.

10- Build a Team of Advisors, CPAs, Attorneys

We do this very well at Wiser Wealth Management, we have a team of attorneys and CPAs behind us, to support our clients in all their financial needs, and give them a strategy on how to make the most out of their hard-earned money. 

Download our eBook on “Top Reasons Most Financial Plans Fail”


0:00 Intro

6:50 Don’t Buy Annuities

11:43 Manage Your Investments Tax-wise

18:38 Convert IRA to Roth

23:37 Contribute to 529 Plans

27:34 Max out Your 401k

30:20 Max out an HSA

31:29 Invest in Real Estate

33:45 Increase Your Giving

36:48 Give Items of Value

39:00 Start a Donor Advised Fund 

40:48 Build a Team of Advisors, CPA’s, Planners, Attorneys


Learn more about Casey Smith and Brad Lyons, CFP®.


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Learn more about A Wiser Retirement podcast and access previous episodes.


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