Estate Tax Laws: What Retirees Should Know

, ,

An educational guide for retirees and pre‑retirees, prepared by Agemy Financial Strategies

Estate planning is about far more than drafting a will. For those approaching and in retirement, it is a critical part of protecting what you’ve built, caring for loved ones, and helping ensure your money is transferred according to your wishes — not default rules or unnecessary taxes. One of the most misunderstood areas of estate planning is estate tax law.

While many retirees assume estate taxes only affect the ultra‑wealthy, the reality is more nuanced. Federal exemptions are high, but state estate taxes, income tax implications for heirs, and changing laws can still create unintended consequences without proper planning.

This guide explains estate tax laws retirees should understand, how current rules work, common misconceptions, and practical strategies to help preserve your legacy with confidence.

What Is an Estate Tax?

An estate tax is a tax imposed on the transfer of assets at death. It applies to the total value of everything you own at the time of your passing, known as your gross estate. This may include:

  • Cash and bank accounts
  • Investment portfolios
  • Retirement accounts (IRAs, 401(k)s, Roth accounts)
  • Real estate, including primary and vacation homes
  • Business interests
  • Life insurance proceeds (in certain situations)
  • Personal property such as vehicles, collectibles, and jewelry

If the value of your estate exceeds certain exemption thresholds, taxes may be owed before assets are distributed to heirs.

Importantly, estate taxes are different from inheritance taxes. Estate taxes are paid by the estate itself before assets are distributed. Inheritance taxes, which only apply in certain states, are paid by the beneficiary receiving the inheritance.

Estate Tax Laws

Federal Estate Tax Laws: The Basics for Retirees

Current Federal Estate Tax Exemption

Under current U.S. law, federal estate taxes apply only to estates above a generous exemption amount. As of 2026:

As of 2026: The federal estate/gift tax exemption is permanently set at $15 million per individual ($30 million for married couples), indexed for inflation going forward. This stability creates clear long-term planning—though state taxes, income tax basis planning, and asset growth still demand proactive strategies.

Only the portion above the exemption faces 40% federal tax.

Federal Estate Tax Rates

Federal estate tax rates are progressive, with a top rate of 40% on amounts above the exemption. While this rate is significant, proper planning can dramatically reduce — or eliminate — exposure.

The Unified Gift and Estate Tax System

The estate tax is unified with the gift tax. This means:

  • Gifts made during your lifetime count toward your lifetime exemption
  • The same exemption protects lifetime gifts and transfers at death

Large gifts do not usually trigger immediate tax, but they reduce the exemption available later.

Why Estate Tax Planning Still Matters for Retirees

Many retirees assume estate tax planning is unnecessary because their estate falls below federal thresholds. However, focusing only on the federal estate tax can be misleading.

Estate planning for retirees should also account for:

  • State estate or inheritance taxes
  • Income taxes heirs may owe on inherited assets
  • Distribution timing and control
  • Family dynamics, including blended families
  • Charitable goals
  • Protection against creditor or legal risk

Estate tax laws intersect with all of these considerations.

Estate Tax Laws

State Estate and Inheritance Taxes: A Hidden Risk

Even if your estate is not large enough to trigger federal estate tax, state‑level taxes may still apply.

Some states impose their own estate taxes with exemptions far lower than the federal level. Others levy inheritance taxes on beneficiaries, depending on their relationship to the deceased.

For retirees, this means:

  • An estate that owes no federal tax may still owe state tax
  • Planning strategies must account for where you live — and sometimes where your heirs live

State tax exposure is a common blind spot in retirement estate planning.

Estate Taxes and Retirement Accounts

Retirement accounts often represent one of the largest portions of a retiree’s estate — and they come with unique tax considerations.

Income Taxes for Heirs

Traditional IRAs and 401(k)s are funded with pre‑tax dollars. When heirs inherit these accounts, withdrawals are generally taxed as ordinary income.

Under current rules, many non‑spouse beneficiaries must withdraw inherited retirement accounts within a limited timeframe, accelerating income taxes.

This creates a double consideration:

  • The value of the account may count toward your taxable estate
  • Your heirs may face significant income taxes after inheriting

Roth Accounts

Roth IRAs offer different advantages. While still included in your estate value, qualified withdrawals by heirs are generally income‑tax‑free, making them a powerful legacy asset when coordinated properly.

Step‑Up in Basis: A Critical Tax Benefit for Heirs

One of the most valuable features of estate planning is the step‑up in cost basis.

Assets that pass through your estate typically receive a new tax basis equal to their fair market value at the date of death. This may reduce capital gains taxes for heirs who later sell the asset.

For example:

  • An investment purchased decades ago for $50,000 may be worth $500,000 at death
  • With a step‑up in basis, heirs may owe little or no capital gains tax if sold soon after

This is why gifting appreciated assets during life must be evaluated carefully — lifetime gifts do not receive a step‑up in basis.

Portability: What Married Retirees Should Know

Portability allows a surviving spouse to use any unused portion of a deceased spouse’s federal estate tax exemption.

This can be a powerful tool for married retirees, but it is not automatic. Certain elections must be made after the first spouse’s death to preserve unused exemptions.

While portability simplifies some planning, it may not replace the benefits of trusts, particularly when state taxes, asset protection, or remarriage risks are involved.

Trusts and Estate Tax Planning for Retirees

Trusts remain one of the most effective estate planning tools, even for retirees who do not expect to owe federal estate tax.

Common trust strategies include:

Credit Shelter (Bypass) Trusts

These trusts preserve the first spouse’s exemption while allowing the surviving spouse access to income or principal under defined terms.

Irrevocable Life Insurance Trusts (ILITs)

ILITs remove life insurance proceeds from the taxable estate, which can be critical for retirees with large policies.

Charitable Trusts

Charitable remainder and charitable lead trusts can provide income, tax benefits, and long‑term philanthropic impact.

Trust selection should align with your tax exposure, income needs, and family goals.

Estate Tax Laws

Charitable Strategies That Help Reduce Estate Taxes

For retirees with charitable intentions, philanthropy can be an effective estate planning tool.

Options may include:

  • Direct bequests to charities
  • Donor‑advised funds
  • Qualified charitable distributions (QCDs) from IRAs
  • Charitable trusts that provide lifetime income

Charitable gifts may reduce estate size while allowing you to support causes you value.

Common Estate Tax Mistakes Retirees Make

Even well‑intentioned retirees can make costly mistakes, including:

  • Assuming estate taxes will never apply
  • Failing to update beneficiary designations
  • Overusing joint ownership without understanding the consequences
  • Ignoring state estate or inheritance taxes
  • Not coordinating retirement income planning with estate planning

Estate planning should be revisited regularly, especially after retirement, the death of a spouse, or major tax law changes.

When Should Retirees Review Their Estate Plan?

You should review your estate plan:

  • At retirement
  • After major changes in tax law
  • After a significant change in net worth
  • Following marriage, divorce, or remarriage
  • After the birth of grandchildren
  • When relocating to a new state

Estate planning is not a one‑time event — it is an ongoing process.

Estate Tax Laws

How Agemy Financial Strategies Helps Retirees Plan Confidently

At Agemy Financial Strategies, estate tax planning is integrated into your broader retirement strategy. We help retirees:

  • Understand how estate taxes fit into their full financial picture
  • Coordinate income planning with legacy goals
  • Adjust strategies as laws and life circumstances evolve

Our goal is clarity, confidence, and continuity — so your wealth supports both your retirement and your legacy.

Final Thoughts

Estate tax laws may seem complex, but understanding how they apply to retirees is essential to protecting what you’ve earned. With thoughtful planning, most retirees can minimize taxes, reduce stress for loved ones, and help ensure assets are transferred efficiently and intentionally.

A proactive approach today can make a meaningful difference for generations to come.

If you’re approaching or already in retirement, now is the time to ensure your estate plan reflects current laws, your financial reality, and your long‑term wishes.

Contact us at agemy.com. 

Investment advisory services are offered through Agemy Wealth Advisors, LLC, a Registered Investment Advisor and fiduciary to its clients. Agemy Financial Strategies, Inc. is a franchisee of Retirement Income Source®, LLC. Agemy Financial Strategies, Inc. and Agemy Wealth Advisors, LLC are associated entities. Agemy Financial Strategies, Inc. and Agemy Wealth Advisors, LLC entities are not associated with Retirement Income Source®, LLC. The information contained in this e-mail is intended for the exclusive use of the addressee(s) and may contain confidential or privileged information. Any review, reliance or distribution by others or forwarding without the express permission of the sender is strictly prohibited. If you are not the intended recipient, please contact the sender and delete all copies. To the extent permitted by law, Agemy Financial Strategies, Inc and Agemy Wealth Advisors, LLC, and Retirement Income Source, LLC do not accept any liability arising from the use or retransmission of the information in this e-mail.

/by

2026 Tax Planning: Building a Tax-Smart Portfolio

,

Many HNWI were left frustrated by their monumental tax bill in 2025. In 2026, Agemy Financial Strategies is here to guide you on keeping more of what you earn this year — thoughtfully, legally, and strategically.

As markets evolve and tax law adjusts for inflation and policy, a tax-aware investment plan is no longer a “nice to have;” it can be central to helping preserve wealth and improve after-tax returns. 

Whether you’re a high-net-worth individual (HNWI) planning distributions in retirement, an owner of concentrated stock positions, or someone building generational wealth, 2026 brings both familiar rules and specific inflation-adjusted thresholds worth planning around. 

What’s Changed for 2026: The Numbers That Matter

Before we dig into strategy, here are a few headline adjustments for the 2026 tax year you should lock into your planning:

  • The IRS increased standard deductions for 2026 to $16,100 for single filers, $32,200 for married filing jointly, and $24,150 for heads of household; small but important inflation adjustments that change marginal planning decisions. 
  • Federal ordinary income tax still uses seven brackets (10% → 37%), and the inflation-adjusted bracket thresholds for 2026 have shifted upward compared with 2025; these adjustments matter when timing income, Roth conversions, or large one-time gains. 
  • Long-term capital gains tax rates remain at 0%, 15%, and 20%, but the income thresholds that determine which rate applies were adjusted upward for 2026. That affects where selling assets, or managing taxable income, makes the most sense.
  • Required Minimum Distribution (RMD) rules remain adjusted under the SECURE Act changes; retirement account owners should confirm RMD start ages tied to birth year rules and plan distributions accordingly. 
  • The federal estate and gift tax exemption and related amounts have been adjusted (the estate/gift exemption rose in 2026), while the annual gift exclusion remains important for lifetime wealth transfer planning. 

These are the guardrails. The rest of this guide explains how to use them to your advantage.

Start with Asset Location: Where Each Holding Should Live

2026 Tax Planning

“Asset allocation” decides risk and return; “asset location” decides taxes. A tax-smart portfolio places assets in account types that can help minimize future taxes:

  • Tax-deferred accounts (IRAs, traditional 401(k)s): best for high-growth but tax-inefficient assets (taxable interest, taxable bonds, REITs). Growth is sheltered until withdrawn, but withdrawals are taxed as ordinary income, so plan withdrawals around your tax bracket and RMD timing.
  • Tax-free accounts (Roth IRAs/401(k)s): ideal for assets expected to grow the most, because qualified withdrawals are tax-free. Consider Roth conversions in lower-income years (see Roth conversion section).
  • Taxable brokerage accounts: work well for low-turnover equity investments where favorable long-term capital gains and qualified dividends apply; they’re also useful for tax-loss harvesting.

The goal: maximize after-tax terminal wealth, not pre-tax portfolio value. Asset location alone can add materially to client outcomes over decades.

Manage Realized Gains and Losses Intelligently

Capital gains strategy is a core lever of tax efficiency:

  • Harvest losses to offset gains. When positions fall, realize losses to offset current or future capital gains and up to $3,000 of ordinary income (excesses carry forward). But be mindful of the wash-sale rule: repurchasing “substantially identical” securities within 30 days disallows the loss deduction. Use similar-but-not-identical ETFs, or wait the 31 days, or strategically use tax-efficient replacements. 
  • Time sales to hit the favorable long-term capital gains treatment. Holding more than 12 months qualifies gains for 0/15/20% long-term rates. With 2026 thresholds shifted upward, work with your advisor to time sales across tax years so gains fall into the most favorable bracket. 
  • Split gains across years when feasible. If you’re facing a big capital gain event (sale of a business or concentrated stock block), consider spreading dispositions across tax years to avoid pushing income into higher marginal brackets.

Use Roth Conversions When the Math Lines Up

Roth conversions remain one of the most powerful tax tools for HNWIs when used selectively:

  • Convert traditional IRA assets to Roth in years with temporarily lower taxable income (e.g., after a business sale, sabbatical, or early retirement before Social Security/RMDs kick in). You’ll pay tax now, but future qualified withdrawals are tax-free, and Roths are not subject to RMDs.
  • Because 2026 standard deductions and bracket thresholds were adjusted, there may be small windows where a partial conversion captures a lower marginal rate without pushing you into a higher bracket. Coordinate conversions with expected income, capital gains, and filing status.

A careful conversion plan, implemented over multiple years, can help materially reduce lifetime taxes for many clients.

Plan Distributions Around RMD Rules and Social Security Timing

RMDs can force higher taxable income late in life if not anticipated:

  • Know your RMD start age (which changed under recent legislation and related IRS guidance) and model how required withdrawals will push taxable income and capital gains into higher brackets. Consider Roth conversions earlier to help reduce future RMD pressure. 
  • Coordinate withdrawals with Social Security claiming: taking large IRA distributions earlier can increase temporary tax liability and may affect the taxation of Social Security benefits, another reason to model scenarios with your advisor.

Tax-aware withdrawal sequencing (taxable first vs. tax-deferred first vs. Roth first) should be customized to your cash needs, tax profile, and estate objectives.

Dealing with Concentrated Stock Positions

Executives and entrepreneurs often hold concentrated company stock, a major tax planning challenge:

  • Explore equity compensation strategies. Net-settlement, same-day sales, and withholding strategies can minimize taxes at exercise/vesting. For large blocks, consider structured selling (10b5-1 plans), pre-planned sales during blackout periods, or hedging strategies.
  • Use charitable strategies for appreciated stock. Donating highly appreciated securities directly to charity can yield a deduction for fair market value without recognizing capital gains, an efficient alternative to selling then donating. 
  • Consider partial gifting to family or trusts. Transferring shares via annual gift exclusions or into trusts can be useful for multi-generational planning, particularly with estate/gift exemption amounts adjusted for 2026. Always consider the gift tax reporting implications. 

Concentration decisions should balance diversification, tax cost, and emotional/behavioral considerations.

Tax-Efficient Income: Municipal Bonds, Qualified Dividends, and Tax-Managed Funds

2026 Tax Planning

For investors seeking tax-efficient income:

  • Municipal bonds (and muni funds) can offer federally tax-exempt interest that may be attractive to high-bracket taxpayers; state tax treatment depends on residency and bond issuance.
  • Qualified dividends retain favorable tax rates when the holding period requirements are met, favorable for portfolios that emphasize dividend growers.
  • Tax-managed mutual funds and ETFs intentionally minimize distributions and capital gains; they can be valuable in taxable accounts for long-term investors.

Match income sources to account types and client tax brackets to help optimize after-tax yield.

Charitable Giving and Donor-Advised Funds (DAFs)

Charitable giving is both philanthropic and tax-strategic for many HNWIs:

  • Donor-Advised Funds allow immediate tax deductions (in the year of funding) while you distribute grants over time; useful in high-income years or when you want to bunch charitable deductions above the standard deduction.
  • Gifting appreciated securities to charity avoids capital gains and provides a deduction for fair market value, often superior to selling and then donating.

Philanthropy is highly personalized, but tax efficiency can help increase the impact of every dollar given.

Estate, Gift, and Multigenerational Planning

For high-net-worth families, tax planning extends beyond income taxes:

  • 2026’s increased estate and gift exemption numbers change the calculus for lifetime gifting vs. bequests; incremental opportunities exist to transfer wealth tax-efficiently while regulatory windows remain. Annual exclusions remain useful for smaller, recurring gifts.
  • Consider GRATs, intentionally defective grantor trusts (IDGTs), and other estate tools if preserving business value or removing future appreciation from the taxable estate fits your goals. These techniques require careful legal and tax coordination.

Always coordinate with estate counsel and your advisor, as tax and legal rules interact tightly here.

Stay Mindful of the Wash-Wale Rule and New Reporting Realities

Tax optimization must be done within the rules:

  • The wash-sale rule prevents claiming losses where you buy substantially identical securities within a 30-day window; that rule is enforced, and modern brokerage reporting makes it easier for the IRS to detect disallowed losses. Use tax-efficient replacements or plan repurchases outside the wash-sale window. 

Good tax planning is proactive: avoidance of common traps is as valuable as capturing opportunities.

Connecticut State Tax Considerations for 2026

2026 Tax Planning

For HNWIs based in Connecticut, state taxes play a crucial role in overall tax-smart planning. Connecticut has its own set of income, capital gains, and estate considerations that must be factored into any comprehensive strategy.

  • Income Tax Rates: Connecticut has progressive income tax rates ranging from 3% to 6.99% for 2026. High-net-worth residents should carefully plan the timing of income recognition, including bonuses, dividends, and distributions from retirement accounts, to avoid unnecessary bracket creep.
  • Capital Gains: Unlike some states, Connecticut taxes capital gains as ordinary income. That means that gains from the sale of appreciated assets are subject to the same top marginal rate (6.99%) as other income. Consider strategies like tax-loss harvesting or charitable contributions of appreciated securities to help mitigate state-level gains taxes.
  • Retirement Income: Connecticut offers some exemptions for retirement income, but they are limited. Traditional IRA distributions, pensions, and 401(k) withdrawals are fully taxable at the state level. This makes Roth conversions or strategic timing of withdrawals even more relevant for Connecticut residents.
  • Estate and Gift Taxes: Connecticut maintains a state estate tax, independent of the federal exemption. In 2026, the exemption is $13.1 million (inflation-adjusted). For estates exceeding this threshold, planning strategies such as lifetime gifting or trusts may reduce exposure to Connecticut estate taxes.

Actionable Tip: Connecticut HNWIs should coordinate federal and state planning, particularly around Roth conversions and RMDs, to help optimize after-tax outcomes. Working with your Agemy Financial Strategies advisor can help ensure that your plan considers both sets of tax rules, avoiding surprises at filing time.

Colorado State Tax Considerations for 2026

2026 Tax Planning

For HNWIs in Colorado, understanding state-specific rules is equally important in building a tax-smart portfolio. Colorado’s tax structure is simpler than Connecticut’s but has key implications for investment and retirement planning.

  • Flat Income Tax Rate: Colorado has a flat income tax rate of 4.4% for 2026. While simpler than a progressive system, this means that all ordinary income, including wages, traditional IRA withdrawals, and taxable interest, is taxed at the same rate. For HNWIs, timing distributions to align with federal planning strategies remains essential.
  • Capital Gains: Capital gains in Colorado are treated as ordinary income at the flat 4.4% rate. While lower than top federal or Connecticut rates, this still reinforces the value of long-term gain strategies, loss harvesting, and charitable giving to offset taxable gains.
  • Retirement Income: Colorado generally taxes retirement income at the flat rate as well, with no additional deductions for pensions or Social Security. This makes tax-efficient retirement planning strategies, including Roth conversions and carefully timed withdrawals, especially beneficial.
  • Estate and Gift Taxes: Colorado does not have a state estate tax. This simplifies estate planning compared to Connecticut but highlights the importance of federal planning, charitable strategies, and multi-generational wealth transfer techniques.

Actionable Tip: For Colorado HNWIs, simplicity in the flat tax rate can help with predictability, but it still rewards tax-smart investment decisions. Coordinating your federal and state tax strategies through Agemy Financial Strategies helps ensure that your portfolio maximizes after-tax growth efficiently.

Implementation Checklist for HNWIs in 2026

This practical checklist helps translate ideas into action:

  1. Run a tax scenario model for 2026–2030: include RMDs, Social Security, sale events, and projected capital gains.
  2. Revisit asset location: move tax-inefficient holdings to tax-deferred accounts and growth assets to Roth when appropriate.
  3. Consider staged Roth conversions in lower-income years; model their effect on bracket thresholds and long-term estate tax planning.
  4. Identify concentrated positions and set a multi-year diversification plan (using options, trusts, or charitable giving where appropriate).
  5. Harvest losses intentionally, but avoid wash-sale traps.
  6. Evaluate charitable bunching and DAFs if itemized deductions are lumpy across years.
  7. Confirm gift and estate planning windows with estate counsel, particularly if you intend to make lifetime large gifts.
  8. Coordinate with your advisor on timing major realizations around bracket thresholds and capital gains levels for 2026. (Small timing differences can change the tax treatment materially.)

Why Work with Agemy Financial Strategies?

At Agemy Financial Strategie, we take a fiduciary approach: we model tax impacts, recommend tailored implementation strategies, and coordinate with your CPA and estate attorney to ensure everything is aligned. 

Tax-smart investing is not a one-time event; it’s continuous: annual tax inflation adjustments, life changes, and market events all create new opportunities and risks. We build plans that are resilient, flexible, and designed to help maximize after-tax outcomes while keeping your financial life simple and purposeful.

2026 Tax Planning

Final Thoughts

Taxes are a predictable friction, and the better you manage that friction, the more wealth you keep and the sooner your financial goals are realized. For 2026, that means paying attention to inflation-adjusted thresholds, intelligently locating assets, using Roth conversions and charitable strategies when they make sense, and coordinating distributions around RMDs and Social Security. Small, disciplined decisions compound over the years, and a disciplined tax plan can be one of the most potent drivers of long-term financial success.

Reach out to Agemy Financial Strategies to schedule a planning session. Let’s make 2026 the year your portfolio works smarter for you.

Investment advisory services are offered through Agemy Wealth Advisors, LLC, a Registered Investment Advisor and fiduciary to its clients. Agemy Financial Strategies, Inc. is a franchisee of Retirement Income Source®, LLC. Agemy Financial Strategies, Inc. and Agemy Wealth Advisors, LLC are associated entities. Agemy Financial Strategies, Inc. and Agemy Wealth Advisors, LLC entities are not associated with Retirement Income Source®, LLC. The information contained in this e-mail is intended for the exclusive use of the addressee(s) and may contain confidential or privileged information. Any review, reliance or distribution by others or forwarding without the express permission of the sender is strictly prohibited. If you are not the intended recipient, please contact the sender and delete all copies. To the extent permitted by law, Agemy Financial Strategies, Inc and Agemy Wealth Advisors, LLC, and Retirement Income Source, LLC do not accept any liability arising from the use or retransmission of the information in this e-mail.
/by

RMDs and Capital Gains: Planning for a Tax-Efficient Retirement Income

, , ,

One of the most critical aspects of retirement planning is managing taxes efficiently. Two key elements that can significantly impact your retirement income are Required Minimum Distributions (RMDs) and capital gains. Understanding these factors and implementing strategic planning can help you preserve more of your wealth and ensure your income lasts throughout retirement.

In this blog, we’ll explore what RMDs and capital gains are, why they matter, and how you can help plan your retirement income in a tax-efficient way.

What Are RMDs?

Required Minimum Distributions (RMDs) are the minimum amounts that the IRS requires you to withdraw from certain retirement accounts once you reach a specific age. The purpose of RMDs is to help ensure that individuals eventually pay taxes on their tax-deferred retirement savings.

Accounts Subject to RMDs

RMDs apply to the following account types:

  • Traditional IRAs
  • SEP IRAs and SIMPLE IRAs
  • 401(k), 403(b), and 457(b) plans
  • Other employer-sponsored retirement plans

It’s important to note that Roth IRAs do not have RMDs during the original account owner’s lifetime, making them a powerful tool for tax planning.

RMD Age and Calculation

Currently, the RMD age is 73 (for individuals turning 73 after December 31, 2023). Previously, it was 72. Your RMD is calculated based on your account balance as of December 31 of the previous year, divided by a life expectancy factor published by the IRS.

For example, if your IRA balance is $500,000 and your IRS life expectancy factor is 27, your RMD for the year would be approximately $18,518.

Consequences of Missing an RMD

Failing to take your RMD can be costly. The IRS imposes a 50% excise tax on the amount you should have withdrawn but did not. For example, if your required distribution was $20,000 and you did not take it, you could owe $10,000 in penalties. This makes careful planning crucial.

Understanding Capital Gains

While RMDs apply to tax-deferred accounts, capital gains typically apply to taxable investment accounts. Capital gains occur when you sell an investment for more than you paid for it.

Types of Capital Gains

  • Short-term capital gains: Gains on assets held for one year or less are taxed at your ordinary income tax rate, which can be as high as 37% at the federal level.
  • Long-term capital gains: Gains on assets held for more than one year are taxed at a lower rate, typically 0%, 15%, or 20%, depending on your taxable income.

For retirees, capital gains can be a powerful tool for supplementing income, particularly if planned strategically to help minimize tax liability.

Tax Considerations

Even though long-term capital gains rates are generally lower than ordinary income rates, selling investments indiscriminately can still push you into a higher tax bracket. Additionally, gains can affect other taxes, such as:

  • Medicare surtax: High-income retirees may be subject to a 3.8% Net Investment Income Tax.
  • Social Security taxation: Your capital gains could make more of your Social Security benefits taxable.

Why RMDs and Capital Gains Matter Together

Many retirees hold both tax-deferred accounts (like IRAs or 401(k)s) and taxable accounts (like brokerage accounts). Coordinating distributions and capital gains sales can help reduce your overall tax burden.

The Tax-Efficiency Challenge

RMDs are taxed as ordinary income. If you also sell investments in a taxable account, the combination of ordinary income and capital gains can push you into a higher tax bracket. Poorly timed withdrawals and sales can trigger unnecessary taxes, reducing the longevity of your portfolio.

Example Scenario

Imagine a retiree with $800,000 in a traditional IRA and $200,000 in a taxable brokerage account. Their RMD for the year is $30,000. If they also sell $50,000 worth of stocks in the brokerage account with $20,000 in long-term gains, their taxable income could jump, increasing the tax rate on both RMDs and capital gains.

Strategically managing these withdrawals can help reduce taxes, preserve more wealth, and provide more consistent retirement income.

Strategies for Tax-Efficient Retirement Income

Here are practical strategies retirees can use to help optimize withdrawals and manage taxes:

1. Consider Roth Conversions

Roth conversions involve transferring funds from a traditional IRA or 401(k) into a Roth IRA. Taxes are paid at the time of conversion, but future withdrawals, including RMDs, are tax-free.

Benefits:

  • Reduces future RMDs, potentially lowering taxable income in retirement.
  • Provides a tax-free income source for later years.
  • Can be timed in lower-income years to help minimize the conversion tax impact.

Example: Converting $50,000 from a traditional IRA to a Roth IRA in a year when your income is unusually low may result in paying taxes at a lower rate than you would in future years when RMDs increase your taxable income.

2. Strategically Withdraw from Taxable Accounts

Selling investments in a taxable account before reaching the RMD age can help you manage future RMDs more efficiently. This is sometimes called tax bracket management.

Advantages:

  • Helps allow you to take advantage of lower long-term capital gains rates.
  • Helps reduce the size of tax-deferred accounts, thereby reducing future RMDs.
  • Helps provide cash flow for early retirement without increasing ordinary income.

Tip: Work with your financial advisor to map out withdrawals and capital gains sales over multiple years, keeping your tax bracket in mind.

3. Charity Donations

Qualified charitable distributions (QCDs) allow retirees to donate directly from their IRAs to a qualified charity.

Benefits:

  • Counts toward your RMD, satisfying IRS requirements.
  • Excluding taxable income can help lower your overall tax burden.
  • Supports causes you care about while helping to reduce taxes.

Example: A $10,000 QCD reduces both your RMD and taxable income by $10,000.

4. Harvest Capital Losses

Offset capital gains with capital losses from your taxable accounts. This strategy, known as tax-loss harvesting, can reduce your taxable income.

Advantages:

  • Helps minimize taxes owed on capital gains.
  • Can be used to offset up to $3,000 of ordinary income per year.
  • Helps provide flexibility for future years’ gains.

Tip: Keep in mind the wash-sale rule, which prevents claiming a loss if you buy the same or substantially identical security within 30 days.

5. Consider Timing RMDs

If possible, retirees can strategically time withdrawals from tax-deferred accounts to manage taxable income.

Example:

If your RMD is $25,000 but your total income is close to a tax bracket threshold, you might take slightly less RMD and cover the rest from Roth or taxable accounts to avoid jumping into a higher bracket.
In some cases, spreading RMDs over multiple accounts or taking partial distributions in advance of RMD age (where allowed) can help reduce the annual tax burden.

6. Monitor State Taxes

State income taxes vary significantly and can impact both RMDs and capital gains. Retirees living in high-tax states may want to explore options such as:

  • Moving to a state with lower or no income tax.
  • Using tax-advantaged accounts strategically.
  • Consulting with a tax professional for state-specific strategies.

Balancing Income Needs with Tax Efficiency

Ultimately, retirement planning is a balancing act. You want enough income to cover living expenses, while helping minimize taxes and preserve your portfolio.

Key considerations include:

  • Income sequencing: Decide which accounts to draw from first: taxable, tax-deferred, or tax-free (Roth).
  • Brackets and thresholds: Stay mindful of tax brackets, Medicare premiums, and Social Security taxation thresholds.
  • Longevity risk: Ensure that withdrawals do not deplete your assets too early.

Working with a Fiduciary Advisor

Managing RMDs and capital gains can be complex, and the stakes are high. A skilled fiduciary  advisor can help:

  • Project future RMDs and taxable income.
  • Create a coordinated withdrawal strategy.
  • Implement Roth conversions, QCDs, and tax-loss harvesting efficiently.
  • Monitor and adjust strategies as tax laws and personal circumstances change.

At Agemy Financial Strategies, we’re experienced in helping retirees create tax-efficient income strategies that balance the need for cash flow with the goal of preserving wealth. Proactively planning can help you reduce unnecessary taxes, protect your portfolio, and enjoy a more secure retirement.

Key Takeaways

  1. RMDs are mandatory withdrawals from tax-deferred accounts and are taxed as ordinary income.
  2. Capital gains occur in taxable accounts and can be managed strategically to help minimize taxes.
  3. Combining RMDs and capital gains planning helps optimize tax efficiency and retirement income.
  4. Strategies like Roth conversions, charitable giving, tax-loss harvesting, and timing withdrawals can help reduce taxes and increase financial flexibility.
  5. Working with a financial advisor helps ensure a personalized, comprehensive approach to retirement income planning.

Tax-efficient retirement planning is not just about paying fewer taxes; it’s about creating a sustainable, predictable income stream for the life you envision. Understanding RMDs, capital gains, and strategic planning options can help you maximize your retirement savings, protect your wealth, and enjoy the lifestyle you’ve worked so hard to achieve.

Contact Agemy Financial Strategies

If you want to help ensure your retirement income is tax-efficient and sustainable, Agemy Financial Strategies can guide you. Our team provides tailored strategies to help retirees manage RMDs, capital gains, and other critical financial considerations.

Contact us today to schedule a consultation and start planning for a retirement that’s as smart as it is fulfilling.

Frequently Asked Questions (FAQs)

1. What is the difference between RMDs and capital gains?
Answer: RMDs (Required Minimum Distributions) are mandatory withdrawals from tax-deferred retirement accounts like traditional IRAs and 401(k)s, taxed as ordinary income. Capital gains occur when you sell investments in taxable accounts for a profit. Unlike RMDs, capital gains can be managed and timed strategically to help reduce taxes.

2. At what age do I have to start taking RMDs?
Answer: The current RMD age is 73 for individuals turning 73 after December 31, 2023. Previously, it was 72. RMDs are calculated annually based on your account balance and life expectancy factor published by the IRS.

3. Can I avoid paying taxes on my RMDs?
Answer: While RMDs themselves are generally taxable as ordinary income, you can help to reduce their impact through strategies like Roth conversions, charitable donations via Qualified Charitable Distributions (QCDs), or careful withdrawal planning that balances income across different account types.

4. How do capital gains affect my retirement taxes?
Answer: Selling investments in taxable accounts can help generate short-term or long-term capital gains. These gains may push you into a higher tax bracket, affect Social Security taxation, or trigger additional taxes like the Medicare surtax. Strategic planning can help minimize the tax impact while providing supplemental retirement income.

5. Should I work with a financial advisor to manage RMDs and capital gains?
Answer: Absolutely. Managing RMDs and capital gains can be complex, with multiple tax rules, income thresholds, and planning strategies to consider. A financial advisor can help create a personalized, tax-efficient plan that helps balance income needs, preserves wealth, and adapts to changing tax laws and personal circumstances.

Disclaimer: This material is for educational purposes only and does not constitute individualized financial, legal, or tax advice. Consult your professional advisors about your specific situation and state-specific rules.

/by

What HNW Retirees Need to Know About Reduced Social Security Payments, Deductions & Roth Planning

, , , ,

In July 2025, millions of seniors across the U.S. saw their Social Security checks shrink, but not due to inflation or political battles. Instead, this reduction stems from the Social Security Administration’s effort to recoup overpayments made to recipients. For many Americans, this is causing stress, confusion, and financial uncertainty.

Even for high-net-worth individuals (HNWIs) entering or navigating retirement, this news might feel far removed, especially since Social Security payments should be a smaller supplementation for retirement income wealth. But that would be a costly assumption. These changes are just the tip of the iceberg in a shifting landscape of retirement tax policy, income strategy, and Medicare planning, each of which has significant consequences for affluent retirees.

At Agemy Financial Strategies, we believe informed, proactive planning is essential, especially when your retirement success depends on strategic coordination between income, tax, and estate planning.

Let’s break down the recent developments, what they mean for HNW retirees, and how to build a resilient retirement strategy amid uncertainty.

The Reality Behind Reduced Social Security Checks in 2025

Social Security 8

The Social Security Administration (SSA) has started withholding up to 50% of monthly benefits to recoup past overpayments. These overpayments often result from changes in income that weren’t properly reported or miscalculations on the SSA’s end. While unfortunate, the SSA is legally obligated to reclaim these funds.

What HNW Retirees Should Know:

  • You may be overpaid without realizing it. If your income fluctuated in the past few years due to capital gains, distributions, or asset sales, you might be impacted, even if it wasn’t your fault.
  • Recourse is available. If you were overpaid, the SSA offers options such as repayment plans, waivers, or reconsideration appeals. However, these require proactive engagement.

✅ Tip: Set up and regularly check your “My Social Security” account to confirm your benefit estimate and payment amounts. Early detection is critical to avoiding unpleasant surprises.

While this repayment policy mostly affects lower- and middle-income retirees, the implications extend to HNWIs who:

Are Capital Gains From Selling a Home Counted Toward Social Security Earnings?

For many retirees, downsizing or liquidating appreciated real estate is part of a broader wealth strategy. A common concern is whether this triggers a reduction in Social Security benefits.

Good news:Capital gains are not classified as earned income for Social Security purposes. So, selling your home won’t reduce your benefits directly.

However, there’s a catch…

Understanding Provisional Income and the Hidden Tax on Social Security

While capital gains don’t reduce benefits, they do impact how much of your Social Security benefit is subject to income tax. The government uses a formula known as provisional income, which includes:

  • Adjusted Gross Income (AGI)
  • Municipal bond interest
  • 50% of Social Security benefits

Why HNWIs Should Pay Attention:

If your provisional income exceeds the thresholds ($32,000 for individuals or $44,000 for couples), up to 85% of your Social Security benefits may be taxable.

Add this to required minimum distributions (RMDs), capital gains, rental income, or Roth conversions, and you may find yourself in a higher marginal tax bracket than you anticipated.

A New Senior Deduction – But There’s a Catch for Wealthier Retirees

Beginning this year, Americans aged 65 and older are eligible for a new $6,000 tax deduction per person, or $12,000 per couple. It’s a welcome change designed to reduce taxable income for seniors, but it comes with key limitations that disproportionately affect HNWIs.

Key Details:

  • The deduction is age-based, not benefit-based.
  • It is not refundable, meaning it can’t generate a refund beyond your taxable income.
  • It is available to both itemizers and standard deduction filers.
  • Phaseout begins at $150,000 of modified adjusted gross income (MAGI) for joint filers and disappears entirely at $250,000.

What This Means for HNWIs:

If your MAGI exceeds $150,000, your deduction begins to phase out. This can happen quickly, especially when you:

The Roth Conversion Tax Cliff for HNW Seniors

Social Security Updates

Roth IRA conversions are often a cornerstone strategy for tax diversification in retirement. But now, the new senior deduction creates a “tax cliff” for those making Roth conversions post-65.

Example:

A couple over age 65 with $150,000 of MAGI qualifies for the full $12,000 deduction, saving them around $2,640 in taxes. But a $100,000 Roth conversion could spike their income to $250,000, eliminating the deduction and possibly pushing them into a 22% or higher tax bracket.

This seemingly smart tax move becomes significantly less attractive when the deduction is lost and higher Medicare premiums are triggered.

✅ Agemy Insight: Roth conversions must be modeled carefully and possibly executed before age 65, or done incrementally to avoid deduction phaseouts and IRMAA surcharges (Medicare premium hikes).

Medicare Premiums and the Two-Year Lag Effect

Another important factor is how income changes, like those from Roth conversions or asset sales, affect your Medicare Part B and D premiums. Known as IRMAA (Income-Related Monthly Adjustment Amount), these premiums are determined using your income from two years ago.

So in 2025, Medicare premiums are based on 2023 tax returns.

Why This Matters:

If you had unusually high income two years ago (e.g., business sale, Roth conversion, capital gains), your Medicare premiums may increase regardless of your current income.

With Medicare premiums expected to jump 11% to over $200/month in 2025, even small increases in AGI can result in thousands of dollars in avoidable costs over the course of retirement.

Strategic Planning Opportunities for HNW Retirees

Social Security Updates

The convergence of these factors, Social Security recoupment, new tax deductions, income phaseouts, and Medicare surcharges, requires strategic foresight, especially for affluent retirees.

At Agemy Financial Strategies, our fiduciary team is highly experienced in designing coordinated retirement income and tax strategies for high-net-worth clients. Here are some of the proactive moves we recommend:

1. Income Modeling & Timing Roth Conversions

  • Avoid triggering the senior deduction phaseout or unnecessary IRMAA brackets.
  • Convert smaller amounts annually before age 65 or during lower-income years.

2. Charitable Giving Strategies

3. Tax-Efficient Withdrawal Planning

  • Coordinate distributions between taxable, tax-deferred, and Roth accounts to manage MAGI.
  • Delay or accelerate withdrawals depending on tax thresholds.

4. Estate & Trust Planning

  • Reassess estate structures to help minimize tax exposure for heirs.
  • Consider spousal and generational trusts for efficient wealth transfer while helping to preserve income-based benefits.

5. Social Security Optimization

  • Coordinate spousal claiming strategies.
  • Consider delayed claiming to help maximize benefits while minimizing taxable income.

The Bottom Line

The evolving Social Security and tax landscape in 2025 brings a mix of new opportunities and potential traps for high-net-worth retirees. While it’s easy to assume that some changes, like reduced benefit checks, won’t impact you directly, their ripple effects across tax planning, Medicare, and estate strategy can be profound.

At Agemy Financial Strategies, our fiduciary advisors are here to help you navigate these complexities with confidence. Whether you’re considering a Roth conversion, concerned about your tax bracket in retirement, or want to ensure your Medicare premiums stay in check, we’re here to craft a plan tailored to your goals.

Social Security Updates

📞 Ready to take control of your financial future?

Schedule a personalized consultation with our team today, and let’s optimize your retirement with clarity, confidence, and strategy.

👉 Contact us today at agemy.com. 

Frequently Asked Questions

FAQ #1: How do I know if I’ve been overpaid by Social Security?

The best way to verify your Social Security payment is to regularly review your benefits through your “My Social Security” account on the SSA’s website. This portal shows your payment history, expected benefits, and current disbursement amounts. If there’s a discrepancy or unexpected reduction in your check, it could signal an overpayment or administrative correction. Being proactive helps you avoid major clawbacks or the 50% withholding policy now in place.

FAQ #2: I plan to sell an investment property. Will that affect my Social Security benefits?

Capital gains from the sale of a home or investment property do not count as earned income for Social Security benefit eligibility. However, these gains do increase your adjusted gross income (AGI), which can lead to higher taxation on your Social Security benefits and may also affect your Medicare premiums. Strategic tax planning can help mitigate these effects.

FAQ #3: Should I avoid Roth conversions after age 65 because of the new senior deduction phaseout?

Not necessarily, but timing and strategy are crucial. Converting large amounts to a Roth IRA after 65 can increase your modified adjusted gross income (MAGI), causing you to lose eligibility for the new $6,000 senior deduction and trigger higher tax brackets or Medicare premiums. For many HNWIs, it may be more efficient to start converting before age 65 or spread conversions over multiple years to avoid the “tax cliff.”

FAQ #4: Can the new senior deduction help lower my Medicare premiums?

Yes, potentially. The $6,000 deduction per person (or $12,000 per couple) reduces your adjusted gross income, which may lower your IRMAA-adjusted Medicare Part B and D premiums, but there’s a two-year lag. Your 2025 premiums are based on your 2023 income. Therefore, the deduction’s effect won’t be felt in Medicare costs until two years after you claim it. Strategic income reduction now can yield Medicare savings down the line.

FAQ #5: As a high-income retiree, how can I optimize my retirement income while minimizing taxes and penalties?

For HNW retirees, an optimized strategy involves coordinating Social Security timing, Roth conversions, investment withdrawals, and charitable giving. Tools like Qualified Charitable Distributions (QCDs), donor-advised funds, and multi-year tax projections help minimize tax exposure. Working with a fiduciary advisor, like those at Agemy Financial Strategies, helps ensure your retirement plan adjusts to evolving tax laws, preserves wealth, and maximizes income efficiency.

Disclaimer: This content is for educational purposes only and should not be considered financial or investment advice. Please consult with the fiduciary advisors at Agemy Financial Strategies before making any investment decisions.

/by

Colorado Tax Planning – What to Know Before Filing (& Common Tax Pitfalls to Avoid)

,

Tax season is here, and staying ahead of Colorado’s tax landscape is crucial for individuals, families, and business owners alike. Surprisingly, Denver ranks #4 nationwide among the most procrastinating cities when filing taxes—a reminder that early planning can make a significant difference in avoiding last-minute stress and potential tax pitfalls.

Whether you’re a retiree, investor, or entrepreneur, understanding state tax laws can help you legally minimize liabilities and maximize financial opportunities. At Agemy Financial Strategies, our Denver team provides guidance tailored to Colorado’s unique tax structure.

In this blog, we’ll break down the essential elements of Colorado tax planning—including income tax rates, deductions, investment strategies, and estate considerations—to help you optimize your financial future.

Understanding Colorado Standard Deductions

Unlike many states, Colorado does not offer a standard deduction. Typically, standard deductions provide a simplified way to lower taxable income, while itemizing allows taxpayers to claim specific eligible expenses. Colorado has a flat income tax rate of 4.0%, meaning all taxpayers, regardless of income level, are taxed at the same rate. This rate was reduced from 4.40% in 2024 following a ballot measure to help lower tax burdens.

For higher-income earners, an additional factor comes into play. In 2023, Colorado began requiring an “add-back” for taxpayers with a federal adjusted gross income (AGI) of over $300,000. Any federal deductions that exceed state-imposed limits must be added back to taxable income, whether standard or itemized. The limits are as follows:

Sales Tax in Colorado

Colorado’s state sales tax rate is 2.90%, one of the lowest in the country. However, local governments and special districts can impose additional sales taxes, pushing the total rate significantly higher depending on the jurisdiction. Here are a couple of other items that are taxed and tax-exempt:

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Taxable
  • Prescription Drugs: Exempt

Local Sales Tax Variations:

  • Denver: 8.81%
  • Boulder: 8.85%
  • Colorado Springs: 8.20%
  • Fort Collins: 7.55%

Since Colorado follows a “home rule” system, which was introduced in 1902, certain cities and counties manage their sales tax collection, leading to different tax applications depending on where purchases are made.

Colorado Property Taxes

Colorado property taxes are relatively low compared to other states, averaging 0.45% of assessed home value—one of the lowest property tax rates in the U.S. For the property tax year 2025, the valuation is 27% of the actual value of the property. For property tax years commencing on or after January 1, 2026, the valuation is 25% of the actual value of the property.

Estate and Inheritance Taxes

The good news for Colorado residents is that the state does not impose an estate or inheritance tax. However, federal estate taxes may still apply to estates exceeding $13.99 million in 2025. While Colorado’s lack of a state estate tax can be beneficial, estate planning is still critical in helping protect your wealth and making sure your assets are distributed according to your wishes. Navigating the complexities of federal estate tax laws and gifting strategies can be overwhelming, but you don’t have to do it alone.

Whether you’re just starting or already in the middle of the process, working with a fiduciary advisor can help you develop a personalized estate plan that aligns with your financial goals, minimizes tax liabilities, and helps provide a smooth transition for your heirs.

Tax Strategies to Consider Before Filing

1. Maximize Retirement Contributions

Contributing to retirement accounts like 401(k)s, IRAs, and Health Savings Accounts (HSAs) can help lower your taxable income while saving for the future. In Colorado, contributions to Traditional IRAs and 401(k)s may be deductible at the federal level, which also impacts state taxes.

  • 401(k) Contribution Limits (2024): $23,000 ($30,500 for those 50+)
  • IRA Contribution Limits (2024):$7,000 ($8,000 for those 50+)
  • HSA Contribution Limits (2024): $4,150 for individuals, $8,300 for families

2. Utilize Colorado’s Retirement Income Exemption

Taxpayers 55 to 64 (or those of any age receiving the income as a death benefit) may exclude the lesser of $20,000 or their taxable retirement income. Taxpayers 65 and older can subtract the lesser of $24,000 or their taxable retirement income.

3. Consider Capital Gains Tax Benefits

Colorado allows a subtraction for qualifying capital gains if the asset is owned for at least five years before the sale and acquired on or after May 9, 1994. This could apply to certain business sales, real estate transactions, or stock holdings, making it an essential strategy for long-term investors.

4. Colorado Social Security

Colorado provides tax benefits for retirees by offering a pension and annuity subtraction, which includes Social Security income. While Social Security benefits are taxed at the federal level depending on total income, Colorado residents can exclude some benefits from state taxation.

How Colorado Taxes Social Security Benefits:

  • Ages 55 to 64: Up to $20,000 can be excluded from taxable income.
  • Ages 65 and older: Up to $24,000 of Social Security and other retirement income can be excluded from taxable income.

Not all Social Security benefits are included in federal taxable income, which affects how much can be subtracted from your Colorado return. The subtraction is only allowed for the portion of Social Security benefits included in federal taxable income, not the total benefits received.

  • The Social Security benefits taxable portion appears on line 6b of your federal tax return, while line 6a shows the total benefits received.
  • IRS Publication 915 provides a worksheet to determine how much of your Social Security benefits are taxable.

With Social Security frequently making headlines—whether due to potential reforms, future funding concerns, or changes in taxation—many retirees are left wondering how their benefits might be impacted. A fiduciary advisor can help you navigate these uncertainties, helping ensure you have a strategy in place to maximize your benefits while minimizing taxes.

5. Taxpayer Benefits

  • Senior Property Tax Exemption: Homeowners 65 and older who have lived in their primary residence for at least 10 years may qualify for a property tax exemption on 50% of the first $200,000 of their home’s value.
  • Disabled Veteran Exemptions: Veterans with a 100% disability rating in Colorado may receive a property tax exemption of 50% of the first $200,000 of the full value of their primary residence. This property tax deferral exists for eligible Veterans over the age of 65 and for active duty personnel.

Common Tax Pitfalls to Avoid

Navigating Colorado’s tax laws can be complex, and even small missteps can lead to missed savings or unexpected liabilities. Here are some common tax pitfalls to watch out for:

1. Missing Out on Available Tax Credits

Failing to take advantage of available tax credits can mean leaving money on the table. Here are some key credits that may help reduce your Colorado tax burden:

  • Child Care Contribution Tax Credit: Donating to a qualifying childcare organization in Colorado can receive a tax credit equal to 50% of your total donation, with a maximum annual cap of $100,000.
  • Renewable Energy Credits: Homeowners who invest in renewable energy—installing solar panels, electric vehicle chargers, or making energy-efficient home upgrades—may qualify for potentially valuable state and federal tax incentives.
  • Property Tax, Rent, and Heat Rebate (PTC): Colorado offers rebates to seniors and qualifying individuals who pay property taxes, rent, or heating bills. This rebate, which must be submitted separately from Form DR 0104PTC, can be as much as $1,154 per year. Additionally, if you apply by October 15, 2025, you may receive an extra TABOR refund of up to $354 ($177 for single filers). For more details and application forms, see here.

2. Not Factoring in State and Local Tax Implications

Colorado’s tax structure differs from federal tax laws in important ways. Additionally, certain local taxes—such as property and sales tax rates—vary by county and municipality, affecting homeowners and business owners. Whether you’re managing investment income, planning for retirement, or running a business, understanding these state and local tax implications can help you optimize your tax strategy and avoid unexpected liabilities.

3. Misreporting Business Income

For self-employed individuals, freelancers, and business owners, accurately reporting income is essential to avoiding IRS penalties and staying compliant with federal and state tax regulations. Colorado follows federal guidelines for self-employment and business income.

However, failing to properly document 1099 earnings, deduct eligible business expenses, or account for self-employment taxes can result in audits or financial penalties. Additionally, you may need to navigate multi-state tax obligations if you operate across state lines. Keeping detailed records and working with a fiduciary advisor can help you meet all reporting requirements while maximizing deductions.

How Agemy Can Help with Tax Planning

At Agemy Financial Strategies, we understand that tax planning isn’t just about filing on time—it’s about creating a proactive tax strategy that helps minimize liabilities and maximize your financial potential. Here’s how our team can help:

  • Retirement Tax Strategies: Our team helps you optimize 401(k), IRA, and RMD withdrawals to reduce taxes and maximize income.
  • Investment Management: Utilize Colorado’s capital gains subtraction, tax-loss harvesting, and tax-efficient portfolio strategies.
  • Estate Planning: Minimize estate tax exposure with strategic gifting, trusts, and inheritance planning.
  • Tax Planning: Optimize business structures, deductions, and self-employment tax strategies.

Final Thoughts

Navigating Colorado’s tax laws requires strategic planning, whether you’re a retiree, business owner, or investor. Understanding the latest deductions, exemptions, and tax credits is key to helping optimize your tax strategy and maximizing savings. Without proper planning, taxes can erode your wealth over time.

Working with a fiduciary advisor can help you evaluate how tax laws may impact your financial future and develop strategies to minimize liabilities. At Agemy Financial Strategies, we assist retirees and high-net-worth individuals in implementing proactive tax planning strategies to help preserve their wealth and enhance their retirement security.

Contact our fiduciary team today to create a tax plan that aligns with your long-term financial goals.

Frequently Asked Questions (FAQs)

Can I deduct property taxes on my Colorado tax return?

Colorado does not have a separate deduction for property taxes. However, if you itemize deductions at the federal level, your property taxes may still be deductible. Agemy Financial Strategies can help you evaluate whether itemizing deductions is right for you and identify other tax-efficient strategies to minimize your tax burden.

How does Colorado tax capital gains?

Certain long-term capital gains (assets held for at least 5 years without interruption) may qualify for a subtraction on your Colorado return. However, standard capital gains tax rates apply at the federal level. Our team can help assess the tax implications and develop strategies to manage capital gains efficiently. By aligning your portfolio with tax-smart planning, we help you keep more of what you earn.

Do I need to file a state tax return in Colorado if I don’t work there full-time?

If you reside in Colorado for any portion of the year or earn income sourced from Colorado, you may be required to file a Colorado tax return, even if you work remotely. Tax rules for part-year residents and remote workers can be tricky. Agemy Financial Strategies can help you determine your filing obligations, avoid potential penalties, and develop a strategy that checks your tax liabilities.

How does Colorado tax retirement account withdrawals?

Withdrawals from 401(k)s, IRAs, and other retirement accounts are subject to a 4.0% flat income tax, but retirees can benefit from the pension and annuity subtraction to reduce taxable income. The amount you can subtract depends on your age and income sources. Federal taxes on retirement distributions still apply, and without proper planning, required minimum distributions (RMDs) could push you into a higher tax bracket. Agemy Financial Strategies assists in tax-efficient retirement planning, helping you structure withdrawals to reduce taxes and preserve your wealth.

Disclaimer: This content is for educational purposes only and should not be considered tax, legal, or investment advice. Tax laws and financial regulations change over time, and individual tax situations vary. Please consult the fiduciary advisors at Agemy Financial Strategies to assess how these tax strategies apply to your unique circumstances.

/by

Connecticut Tax Planning – What to Know Before Filing

,

Spring has sprung, and so has the annual rush of tax preparation—filled with calculations, paperwork, and looming deadlines. Surprisingly, 31% of Americans admit to putting off their tax filings, while 1 in 4 feel unprepared to tackle their 2025 returns.

For Connecticut residents, understanding the state’s tax laws is essential to helping maximize deductions, avoiding penalties, and securing a seamless filing process. With over 35 years of experience in comprehensive tax and financial planning, Agemy Financial Strategies has helped clients navigate Connecticut’s evolving tax landscape.

As a Connecticut-based fiduciary firm with offices in Colorado, we provide personalized guidance to help your tax strategy align with your broader wealth management plan. In this blog, we’ll explore everything you need to know about filing your Connecticut taxes, including recent tax changes, key deductions, and proven strategies to help reduce your tax burden. Let’s dive in!

Connecticut State Income Tax 

Connecticut implemented its first state income tax on August 22, 1991, with a flat 4.5% rate to address a $963 million budget deficit. Since then, the state has transitioned to a progressive income tax system, which now includes seven tax brackets–ranging from 2% to 6.99% for the 2024 tax year (the taxes you’ll file in 2025). 

The state taxes you owe depend on your income, filing status, and any deductions or credits you qualify for. Connecticut’s tiered tax system means that as your taxable income increases, so does your tax rate. Wondering how these tax brackets apply to your filing status? Below is a breakdown of Connecticut’s income tax brackets and rates for single filers, married couples, and other filing categories.

Connecticut Sales Tax

As of 2025, Connecticut maintains a statewide sales tax rate of 6.35%, applicable to the retail sale, lease, or rental of most goods and taxable services. Notably, Connecticut does not impose additional local sales taxes, resulting in a uniform rate across the state.

Exceptions to the Standard Sales Tax Rate: 

  • Rental Vehicles: The rental or leasing of a passenger motor vehicle for 30 consecutive calendar days or less is taxed at 9.35%.
  • Computer and Data Processing Services: A reduced tax rate of 1% is applied to computer and data processing services.
  • Luxury and Specific Items: A tax rate of 7.75% applies to most motor vehicles over $50,000. Jewelry (real or imitation) priced over $5,000. Articles of clothing or footwear, handbags, luggage, umbrellas, wallets, or watches are over $1,000. 

Connecticut Property Tax

Connecticut’s property taxes are among the highest in the United States. The state’s average effective property tax rate is 1.92%, significantly higher than the national average of 1.07%. Unlike many states where counties administer property taxes, Connecticut assigns this responsibility to individual cities and towns. Each municipality sets its mill rate, which determines the tax payable per $1,000 of assessed property value.

Connecticut Inheritance and Estate Tax

Connecticut does not impose an inheritance tax. However, it does have an estate tax that applies to estates exceeding certain thresholds. Connecticut imposes a flat 12% tax on estates valued at more than $13.61 million (i.e., the federal estate tax threshold for 2024). It’s important to note that if the decedent resided in a state that imposes an inheritance tax, beneficiaries may be liable for that state’s inheritance tax regardless of their state of residence.

Therefore, it’s advisable to consult the specific laws of the decedent’s state to determine any potential tax obligations. For personalized guidance on navigating Connecticut’s tax landscape, Agemy Financial Strategies is here to assist. Our team of fiduciary advisors is committed to acting in your best interest, helping you find solutions tailored to your individual needs and financial goals.

Recent Tax Changes in Connecticut

Tax laws constantly evolve, and staying informed about the latest updates can help you maximize savings and avoid surprises when filing your return. The Connecticut Department of Revenue Services (DRS) has introduced key changes that may impact your 2024 tax return. These updates affect income tax brackets, deductions, and credits, potentially influencing your overall tax liability.

Here’s what you need to know about the latest Connecticut tax changes and how they might impact your filing:

1. Retirement Income Tax Exemptions

Connecticut has expanded its retirement income tax exemptions, offering greater relief for retirees. Here’s how these changes may benefit you:

  • If you receive individual retirement account (IRA) distributions (not including Roth IRAs), you can deduct 50% of those amounts, with deductions increasing to 100% by 2026.
  • If you receive income from the Teachers’ Retirement System (TRS), you can deduct 50% of it from your state taxes.
  • If you’re retired from the railroad (tier I and tier II railroad retirement benefits) or military, you can deduct 100% of your retirement pay.

2. Income Taxes Paid to Other Jurisdictions 

Wealthier individuals with out-of-state income (from investments, rental properties, or remote work) can claim a credit for taxes paid to other states, reducing double taxation.

3. Historic Homes Rehabilitation Tax Credit 

A 30% refundable credit (up to $30,000) on the costs of rehabilitating historic homes can benefit high-income homeowners and investors who restore qualifying properties.

4. Green Energy Credits

Connecticut offers various credits and incentives to encourage sustainability, including the Residential Clean Energy Credit (30% of the cost of solar panels and battery storage), rebates for energy-efficient home upgrades, and the CHEAPR program for electric vehicle purchases.

Common Tax Mistakes to Avoid

Navigating Connecticut’s tax laws can be complex, and even small errors can lead to unnecessary penalties or missed opportunities for savings. Awareness of common tax mistakes can help you stay compliant and optimize your financial strategy. Here are some key pitfalls to watch out for:

1. Failing to File on Time 

Missing tax deadlines can lead to costly penalties and accrued interest, making filing on time or requesting an extension essential. Even if you can’t pay your full tax bill immediately, filing on time can help you avoid additional penalties. Here are some key deadlines to look out for:

  • April 15, 2025 – Deadline to file 2024 Connecticut and federal tax returns.
  • October 15, 2025 – Extended tax return deadline (if requested by April 15).

The fiduciary advisors at Agemy Financial Strategies can help you stay ahead of tax deadlines, file correctly, and plan for any payments to minimize penalties and interest.

2. Misreporting Income
Even if you don’t receive a W-2 or 1099, you’re still responsible for reporting all taxable income to the state. Failing to report all income sources accurately can lead to audits, penalties, and unexpected tax liabilities. Connecticut taxes various income streams, including:

  • Wages
  • Self-employment earnings
  • Rental income
  • Certain investment gains

Confirming that the income reported on your tax return matches what the IRS and the Connecticut Department of Revenue Services (DRS) receive from employers and financial institutions is important. Agemy Financial Strategies can help you track and report all income sources accurately, helping provide compliance while identifying potential deductions to reduce your taxable income.

3. Not Claiming Available Deductions & Credits
Many Connecticut residents overpay on taxes simply because they don’t take advantage of available deductions and credits. These tax-saving opportunities can help reduce your taxable income or lower your overall tax liability. Failing to claim these deductions and credits can mean leaving money on the table! The fiduciary advisors at Agemy can help you identify and maximize every tax-saving opportunity.

4. Neglecting to Pay Estimated Taxes
If you’re self-employed, own a business, or have significant investment income, failing to make quarterly estimated tax payments can lead to unexpected tax bills, penalties, and interest charges. Unlike W-2 employees who have taxes withheld from their paychecks, freelancers, independent contractors, business owners, and investors must calculate and pay taxes on their income throughout the year. Planning ahead is key to avoiding surprises at tax time. Agemy Financial Strategies can help you estimate your tax liability and implement strategies to help minimize your tax burden.

Tax Planning Strategies to Reduce Your Liability

Smart tax planning can help you keep more of your hard-earned money while helping ensure compliance with Connecticut tax laws. Leveraging strategic deductions, credits, and investment choices can help reduce your potential tax burden and enhance your long-term financial security. Below are key strategies to help minimize your tax liability.

1. Maximize Retirement Contributions

Saving for retirement isn’t just about securing your future—it’s also a powerful tax-saving strategy. These contributions can help reduce your taxable income while helping you build long-term wealth.

  • 401(k) and Traditional IRA Contributions: Pre-tax contributions lower your taxable income, reducing your tax bill today while allowing your investments to grow tax-deferred.
  • Health Savings Account (HSA): If you have a high-deductible health plan, HSA contributions are triple tax-advantaged—meaning they reduce taxable income, grow tax-free, and can be withdrawn tax-free for qualified medical expenses.
  • Roth conversions: Converting a traditional IRA to a Roth IRA can be a strategic move. This allows for tax-free withdrawals in retirement, which is especially useful if you expect to be in a higher tax bracket later.

2. Utilize Tax-Loss Harvesting

Investment losses aren’t always bad—they can be used strategically to help reduce your tax liability. Tax-loss harvesting involves selling underperforming investments to offset capital gains from winning investments, lowering your taxable income.

  • Offset Capital Gains – If you’ve realized capital gains, selling investments at a loss can help neutralize the tax impact.
  • Carry Forward Losses – If your losses exceed your gains, you can use up to $3,000 to offset ordinary income each year and carry forward any remaining losses to future tax years.

3. Consider Charitable Giving

Donating to charity supports causes you care about and offers valuable tax benefits.

  • Donate Appreciated Stocks – Instead of selling stocks and paying capital gains taxes, you can donate them directly to a charity, avoiding capital gains while still receiving a tax deduction.
  • Donor-Advised Fund (DAF)– A DAF allows you to bundle multiple years’ worth of donations, helping you exceed the standard deduction in a year while distributing funds over time. This strategy can be particularly effective for high-income earners looking to maximize tax savings.

4. Review Your Tax Withholding

If you’re not reviewing your tax withholding regularly, you could be overpaying (giving the government an interest-free loan) or underpaying (leading to a surprise tax bill).

  • Check Your W-4 Form – Make sure the amount withheld from your paycheck aligns with your expected tax liability. Adjustments may be needed if you’ve experienced income changes, marriage, dependents, or significant deductions.
  • Avoid Penalties – Underpaying taxes throughout the year can result in penalties and interest. Ensuring accurate withholding can prevent unexpected tax bills when you file.

Final Thoughts

Tax planning is a critical part of wealth management. By staying informed about Connecticut’s tax laws and making the most of available deductions and credits, you can optimize your strategy and avoid unnecessary penalties.

At Agemy Financial Strategies, we provide personalized tax planning guidance designed to align with your unique financial goals. As fiduciary advisors, we are committed to acting in your best interest—helping you find the right solutions for your needs. Our comprehensive financial planning helps ensure your taxes and investments work together to support your long-term success.

Contact us today for more information on our tax and financial planning services.

FAQs About Connecticut Tax Filing

Who is required to file a Connecticut income tax return?

Anyone who lives in Connecticut, earns income or operates a business must file a state income tax return if their income meets the required threshold. Agemy Financial Strategies can assist you in navigating state tax requirements, helping ensure compliance while maximizing deductions and minimizing tax liabilities.

Can I file my Connecticut taxes electronically?

You can file online using MyConnectCT or authorized e-file providers. Our team can assist you through the tax filing process and help determine the best filing method for your financial situation.

What if I work remotely for a company outside Connecticut?

Under the convenience of the employer rule, Connecticut may still tax your income unless you can prove you are working out of state for business necessity. Our team can help you navigate state tax laws to avoid unnecessary taxation while staying compliant.

Are estimated tax payments required in Connecticut?

If you expect to owe more than $1,000 in state taxes, you must make quarterly estimated tax payments. Our fiduciaries can help you calculate and plan your estimated payments to avoid penalties and keep your finances on track.

What happens if I miss the tax filing deadline?

If you miss the deadline, you may face penalties and interest charges. Filing for an extension gives you until October 15th, 2025, but payments are still due by April 15th, 2025. We can assist in managing deadlines, filing extensions if necessary, and creating a proactive tax plan to prevent costly penalties.

Disclaimer: This article is for informational purposes only and should not be considered tax, legal, or financial advice. Consult the qualified fiduciary advisors at Agemy Financial Strategies for guidance specific to your situation.

/by

4 Essential Tax Planning Strategies Every HNWI Should Know

,

For high-net-worth individuals (HNWIs), effective tax planning is just as important as investment growth when it comes to long-term wealth preservation. With the top marginal tax rate in the U.S. at 37% and potential estate tax exemptions set to decline after 2025, strategic tax planning can make a significant impact on reducing liabilities and maximizing financial efficiency.

A well-structured tax strategy allows HNWIs to legally minimize tax burdens, provide compliance with evolving regulations, and preserve more wealth for future generations. In this blog, we explore four essential tax planning strategies to help you optimize your financial position while staying ahead of tax obligations.

Why Having a Tax Strategy is Important

Without strategic tax planning, these factors can significantly erode wealth over time. A proactive tax strategy minimizes tax liability and helps ensure that your investments, estate, and philanthropic efforts align with your long-term financial goals.

  • Preserve Wealth: Reducing tax liabilities allows you to keep more earnings and investment gains.
  • Enhances Investment Returns: Tax-efficient investing can improve net returns by providing the right assets in the most tax-advantaged accounts.
  • Optimizes Charitable Giving: Smart gifting strategies allow you to support causes you care about while receiving tax benefits.
  • Safeguards Your Estate: Proper estate planning can help reduce the tax burden on heirs, allowing more of your wealth to be passed down.

By implementing a proactive tax strategy, you can maximize your financial efficiency, maintain compliance with evolving tax laws, and make informed decisions about wealth management. Let’s explore four key tax planning strategies to help you achieve these goals.

1. Optimize Charitable Giving with Strategic Donations

Charitable giving is a powerful tool for tax planning. It allows you to support causes that matter to you while reducing your taxable income. HNWIs have multiple avenues to help structure their giving to maximize tax benefits. Here are some key strategies for charitable giving:

  • Donor-Advised Funds (DAFs): These allow you to donate assets and receive an immediate tax deduction while deciding which charities to support later.
  • Qualified Charitable Distributions (QCDs): If you’re 70½ or older, you can donate up to $100,000 directly from an IRA to a charity without counting it as taxable income.
  • Charitable Remainder Trusts (CRTs): These provide income during your lifetime while benefiting a charity upon passing, offering estate and income tax benefits.

With recent changes in tax laws, considering long-term charitable strategies can enhance your philanthropic impact while securing favorable tax advantages.

2. Leverage Tax-Advantaged Accounts for Retirement and Investment Growth

Even for HNWIs, tax-advantaged accounts provide valuable opportunities to defer or reduce taxes on investment gains. Proper allocation across these accounts can help yield potential benefits over time. Here are some types of tax-advantaged accounts to consider:

  • Roth IRA Conversions: While you’ll pay taxes on the conversion amount, your investments grow tax-free, and withdrawals in retirement are not subject to income tax.
  • Health Savings Accounts (HSAs): For those with high-deductible health plans, HSAs offer triple tax benefits: contributions are tax-deductible, investments grow tax-free, and withdrawals for qualified medical expenses are tax-free.
  • Life Insurance as an Estate Planning Tool: Properly structured life insurance policies can provide tax-free income to beneficiaries while helping mitigate estate tax burdens.

Implementing a strategic approach to utilizing these accounts can help ensure tax efficiency in both the short and long term. Working alongside a fiduciary advisor can help you leverage these accounts.

3. Minimize Capital Gains Taxes Through Tax-Loss Harvesting and Asset Location

Capital gains taxes can significantly impact wealth accumulation, particularly for HNWIs with diversified investment portfolios. You can reduce tax liabilities and optimize after-tax returns by strategically managing how and when you sell investments.

  • Tax-Loss Harvesting: Offsetting capital gains by selling underperforming investments can help lower your tax bill while maintaining a similar asset allocation.
  • Holding Period Strategies: Long-term capital gains rates are significantly lower than short-term rates. Holding investments for more than one year before selling can help reduce taxes.
  • Asset Location Optimization: Placing tax-inefficient investments (such as bonds and REITs) in tax-advantaged accounts while keeping tax-efficient investments (like index funds) in taxable accounts can improve overall tax efficiency.

Understanding how different investments are taxed—and strategically aligning them—can help you preserve more of your returns. Working with a knowledgeable advisor helps your portfolio be structured in a way that optimizes tax efficiency while supporting your long-term financial goals.

4. Plan for Estate and Gift Taxes to Preserve Generational Wealth

Estate and gift taxes can take a significant portion of wealth if not strategically managed. Understanding how these taxes operate and interact is essential for crafting a comprehensive wealth preservation strategy. Let’s explore each tax in detail:

By proactively planning your estate, you can maximize the wealth passed to future generations while reducing unnecessary tax liabilities.

How Agemy Can Help You with Tax Planning

Navigating the complexities of tax planning can be overwhelming, especially with ever-changing tax laws, investment implications, and estate planning considerations. At Agemy Financial Strategies, our fiduciary advisors work alongside you to create a tailored tax strategy that aligns with your wealth management goals. With a focus on transparency and strategy, our team helps HNWIs:

  • Identify Tax-Efficient Investment Strategies: We analyze your investment portfolio to help optimize asset location, maximize tax efficiency, and manage capital gains.
  • Mitigate Estate and Gift Tax Burdens: Our team helps structure estate plans to minimize tax liability and protect generational wealth.
  • Optimize Retirement and Tax-Advantaged Accounts: We guide you on Roth conversions, tax-efficient withdrawals, and leveraging accounts like HSAs and IRAs.
  • Strategize Philanthropic Giving: We help structure charitable contributions through donor-advised funds, trusts, and other vehicles that can potentially benefit your estate and the causes you care about.

Final Thoughts

Effective tax planning is a crucial component of wealth preservation for HNWIs. Staying informed and proactive in your tax strategy helps ensure that your wealth continues to work for you and your family, both now and in the future.

At Agemy Financial Strategies, we help HNWIs develop tax-efficient wealth management plans tailored to their unique financial goals. Our fiduciary advisors provide guidance to help you maximize tax savings, protect your assets, and build a strong financial future.

Contact us today to schedule your complimentary consultation and start planning for a more tax-efficient future.

Frequently Asked Questions (FAQs)

1. How do tax laws impact HNWIs differently than average taxpayers?

HNWIs often face higher marginal tax rates, exposure to estate and gift taxes, and alternative minimum tax (AMT) considerations. Strategic tax planning is essential to help mitigate these factors. Our fiduciary advisors help HNWIs navigate complex tax laws by implementing strategies that help optimize tax efficiency while staying compliant.

2. Are Roth conversions a good strategy for HNWIs?

Roth conversions can be beneficial if done strategically, particularly in lower-income years or before RMDs begin. They help lock in tax-free growth and withdrawals in retirement. Agemy Financial Strategies provides personalized guidance on timing and executing Roth conversions to minimize tax liability and maximize long-term benefits.

3. What happens if the estate tax exemption is reduced?

If the exemption decreases, more estates will be subject to taxation. Proactive gifting strategies can help mitigate the impact. Our advisors work closely with you to help structure your wealth transfers efficiently, allowing more of your assets to be preserved for future heirs and beneficiaries.

4. Can tax-loss harvesting be done year-round?

Tax-loss harvesting can be executed throughout the year, but many investors optimize it toward year-end to offset capital gains from other investments. If you want to integrate tax-loss harvesting into your investment approach, our fiduciary advisors can help you.

5. How do charitable donations reduce my tax bill?

Charitable contributions can lower taxable income, and depending on the donation type (cash, stocks, trusts), they may provide additional tax benefits such as avoiding capital gains taxes. Agemy Financial Strategies helps clients develop a strategic giving plan that maximizes their charitable impact and tax efficiency.

Disclaimer: This blog is for informational purposes only and should not be considered specific tax, legal, or investment advice. Tax laws are subject to change, and individual circumstances vary. Please consult with the qualified financial professionals at Agemy Financial Strategies before implementing any of the strategies discussed.

/by

2025 Adjustments for Estate, Gift, and GST Tax Exemptions

, ,

Tax laws are shifting, and for individuals committed to preserving their wealth, staying ahead of these changes is more important than ever. 

With new adjustments to estate, gift, and generation-skipping transfer (GST) tax exemptions on the horizon, your decisions could have a lasting impact on your financial legacy. For high-net-worth individuals (HNWIs), understanding these updates isn’t just beneficial—it provides a decisive strategic advantage.

In this blog, we’ll break down the key changes and explore how Agemy Financial Strategies can assist you in navigating the complexities of these taxes, turning challenges into opportunities to help secure your future.

What Are Estate, Gift, and Generation-Skipping Transfer Taxes? 

The federal government employs estate, gift, and generation-skipping transfer (GST) taxes to help ensure wealth transfers are subject to taxation. In turn, this limits the accumulation of untaxed wealth across individuals and generations. Understanding how these taxes operate and interact is essential for crafting a comprehensive wealth preservation strategy. Let’s explore each tax in detail:

1. Estate Tax

The estate tax is a levy imposed on the total value of an individual’s estate that exceeds the federal exemption threshold at the time of their death. This tax applies to assets such as real estate, investments, cash, and other valuables included in the estate. The federal estate tax doesn’t apply unless you hit a certain exemption amount.

  • The exemption amount for people who pass away in 2025 is $13.99 million (up from $13.6 million last year).
  • Married couples can expect their exemption to be $27.98 million (up from $27.22 million last year).

Proper estate planning can help mitigate this tax burden, allowing more wealth to be passed on to your heirs.

2. Gift Tax

The gift tax applies to transferring money or assets during your lifetime that exceeds the annual or lifetime exemption limits. The annual gift tax exclusion sets the amount you can give each recipient without impacting your lifetime exemption. The IRS has announced an increase in the annual gift tax exclusion for 2025:

Maximizing annual gift exclusions helps reduce your taxable estate while providing financial support to loved ones. However, exceeding these limits without careful planning can lead to unnecessary tax liabilities. Working alongside a fiduciary can help you integrate gifting strategies into your broader estate plan.

3. Generation-Skipping Transfer (GST) Tax

The Generation-Skipping Transfer (GST) tax is designed to prevent individuals from avoiding taxation by skipping over a generation and transferring wealth directly to beneficiaries who are at least two generations younger. It is an additional tax on top of the federal gift or estate tax. For the tax year 2025, the GST tax exemption amount is set at $13.99 million per individual.

Transfers to these younger-generation beneficiaries are only tax-free up to the GST tax exemption limit. Any amount exceeding this exemption is subject to the GST tax, which, like the estate tax, has a top rate of 40%. This tax most commonly affects:

  1. Direct Transfers: Gifts or inheritances given directly to grandchildren or other younger-generation individuals.
  2. Trusts: Trusts established for the benefit of grandchildren or great-grandchildren, especially when structured to avoid intermediate taxation on the parent generation.

A fiduciary can help you by providing tailored advice for your estate plan accounts. With proactive planning and guidance, you can better protect your financial legacy and help ensure it benefits your family for years.

Why Understanding These Taxes Matters 

Proper planning for estate, gift, and GST taxes is essential to help protect your financial legacy. Failing to account for these taxes can result in significant financial losses for your heirs and complicate wealth transfer strategies. For example:

  • Overlooking Gift Tax Exclusions: Missing annual or lifetime gift tax exclusions can unintentionally trigger higher tax liabilities.
  • Missing the Current Exemptions: Failing to take advantage of the higher exemptions before they are reduced in 2026 could expose your estate to substantial federal taxes.
  • Mismanaging GST Tax Liabilities: Poor planning could undermine the long-term benefits of trusts and other wealth transfer strategies to skip generations.

Working with a fiduciary can help you have the guidance needed to navigate the nuances of these taxes. A trusted fiduciary can help you maximize available exemptions and create a plan to help preserve your wealth for future generations.

Key Changes to Tax Exemptions for 2025

The Tax Cuts and Jobs Act (TCJA) of 2017 significantly increased the exemptions for estate, gift, and GST tax. However, these enhancements are set to sunset at the end of 2025, potentially altering how wealth can be transferred tax-efficiently. Here’s what to expect:

Post-2025 Adjustments

  • The lifetime estate and gift tax exemptions are scheduled to be cut in half after 2025 to approximately $7 million per individual (adjusted for inflation).
  • Without action, gifts or estate transfers exceeding these reduced limits could face federal taxes at rates as high as 40%.

If you have a large estate, taking advantage of the higher exemptions in 2025 can help reduce your tax liabilities and preserve wealth for future generations. Early planning is essential to avoid the financial burden of potential reductions.

State Estate Taxes: Another Layer to Consider

In addition to federal estate taxes, many states impose their own estate or inheritance taxes, often with lower exemption thresholds. For residents of states like Connecticut, where state-level estate taxes can be significant, careful planning is crucial to help avoid unexpected tax liabilities. 

The current Connecticut estate tax exemption is $13.61, and the flat tax rate is 12%. Any taxable gifts or estates exceeding this exemption amount will be subject to a 12% tax. Thus, it is vital for Connecticut residents to integrate state tax considerations into their overall estate planning strategy.

The absence of a state estate tax offers a significant advantage for Colorado residents. Without an additional layer of taxation, residents can pass on their wealth to loved ones without incurring state-level estate taxes. This benefit particularly appeals to retirees seeking to preserve their legacy and help maximize the financial resources available to their families.

With dedicated offices in Connecticut and Colorado, Agemy Financial Strategies has extensive experience helping residents navigate these state-specific tax laws. Whether navigating Connecticut’s estate tax thresholds or taking advantage of Colorado’s tax benefits, our team helps protect your financial legacy for future generations.

How Agemy Financial Strategies Can Help 

The upcoming changes to estate, gift, and GST tax exemptions present a valuable opportunity to help optimize your financial legacy and minimize future tax burdens for your heirs. However, navigating these complex tax structures requires skilled guidance and thoughtful planning. At Agemy Financial Strategies, we help simplify financial complexities, equipping you with the tools and knowledge to make confident, informed decisions about your wealth. Here’s how we can help:

  1. Tailored Estate Planning: We can design personalized estate plans that align with your unique goals, helping ensure your wealth transitions smoothly and tax-efficiently.
  2. Proactive Gifting Strategies: Our team will guide you in leveraging exemptions, avoiding common pitfalls, and making tax-savvy decisions.
  3. Trust Design and Management: Whether you’re setting up a trust or optimizing an existing one, we provide solutions to help maximize benefits for you and your heirs.
  4. Holistic Financial Advice: Estate planning works best when integrated with your broader financial goals. We offer comprehensive advice to help ensure all aspects of your financial life are aligned.
  5. Staying Ahead of Legislative Changes: Tax laws change frequently, and we keep you informed, adapting strategies as needed.

Preparing for the Future: Start Today

The adjustments to estate, gift, and generation-skipping tax exemptions represent a pivotal moment for estate planning. With potential tax savings at stake, proactive planning in 2025 and beyond is more important than ever.

Whether you’re seeking to preserve wealth for future generations or minimize tax liabilities, the key is working with a knowledgeable advisor who understands your needs. Agemy Financial Strategies is here to assist you in navigating these changes and helping secure your financial legacy.

Contact us today to learn how we can help you make the most of this critical tax planning period.

Frequently Asked Questions (FAQs)

How will these exemptions change in 2026?

Unless new legislation is passed, the exemptions will revert to $5 million per individual (indexed for inflation) on January 1, 2026, which is expected to be approximately $7 million per individual.

What Happens If You Exceed the Annual Limit?

Gifts exceeding the annual exclusion are deducted from your lifetime gift and estate tax exemption. If your total lifetime gifts surpass the federal exemption threshold, the remaining amount may be subject to federal gift taxes, which are taxed at a maximum rate of 40%.

How can I take advantage of the current exemptions?

The higher exemptions in 2025 can be used to make large lifetime gifts, establish trusts, or utilize other tax-efficient wealth transfer strategies. Consulting a fiduciary advisor can help ensure your plan is effective and compliant.

What is a Spousal Lifetime Access Trust (SLAT)?

A SLAT is an irrevocable trust that allows one spouse to gift assets to the other while retaining indirect access to the assets. It is a popular tool for utilizing the higher gift exemptions before they are reduced.

How do state-level estate taxes affect my plan?

Some states impose their own estate or inheritance taxes, with exemption thresholds often lower than federal limits. A comprehensive estate plan should account for both federal and state tax implications.

How does Agemy Financial Strategies help with these taxes?

Agemy Financial Strategies provides personalized estate planning services, including wealth analysis, trust creation, and tax-efficient gifting strategies. We help clients navigate complex tax laws and align their plans with long-term goals.

How do I get started with estate planning?

Start by scheduling a consultation with Agemy Financial Strategies. We’ll help you by reviewing your financial situation, discussing your goals, and designing a tailored estate plan to meet your needs. Visit us today to get started.

Disclaimer: The information provided in this blog is for educational purposes only and should not be considered specific investment, tax, legal, or financial advice. Agemy Financial Strategies does not guarantee results, and past performance does not indicate future results. Tax laws are subject to change, and any strategies discussed should be reviewed in the context of current legislation and individual circumstances.

/by

What You Need to Know About RMDS in 2025

,

As we approach the end of 2024, reviewing your retirement goals is a prime opportunity. One essential aspect to consider? Required Minimum Distributions (RMDs).

RMDs are a cornerstone of many retirement strategies, yet their complex rules and tax implications can make them challenging to navigate. Planning ahead can help you stay on track and optimize your retirement withdrawals.

With new RMD regulations set for 2025, understanding these changes can help you optimize your financial plans. In this blog, we’ll break down the fundamentals of RMDs, highlight the upcoming updates, and share practical tips to help you manage your distributions effectively.

Understanding Required Minimum Distributions (RMDs) 

RMDs are mandatory withdrawals from certain retirement accounts once you reach a specific age. These withdrawals, which have grown tax-deferred over time, help retirement funds become taxable income. RMDs apply to the following accounts:

  • Traditional IRAs
  • SEP IRAs
  • SIMPLE IRAs
  • 401(k), 403(b), and 457(b) plans (excluding Roth 401(k)s).

The annual amount you must withdraw is calculated based on your age, life expectancy, and account balance at the end of the previous year. Failing to take the required amount can result in significant tax penalties. Let’s take a look at key changes to look for in 2025.

Key Changes to RMDs for 2025

As retirement planning continues to evolve, the latest updates to RMDs reflect efforts to provide more flexibility and tax advantages for retirees. The SECURE 2.0 Act introduced several new rules that impact how and when retirees must take distributions from certain accounts and adjust penalties. Below are the main changes for 2025 and beyond, designed to give retirees more control over their withdrawals and tax planning:

1. Increased RMD Starting Age: The age at which individuals must begin taking RMDs has been raised. In 2023, the age increased from 72 to 73, and it will further rise to 75 beginning in 2033.

2. Reduced Penalties for Missed RMDs: The penalty for failing to take an RMD has been reduced from 50% to 25% of the missed amount. If the missed RMD is corrected promptly, the penalty can decrease to 10%. Remember that the IRS has waived penalties for failing to take RMDs for certain inherited IRAs. For more information, see here.

3. Elimination of RMDs for Roth 401(k)s: Previously, Roth 401(k) accounts were subject to RMDs. Under the new rules, RMDs are no longer required for Roth 401(k)s, aligning them with Roth IRAs. It’s important to note that post-death minimum distribution rules, which also apply to Roth IRAs, still apply.

4. Annuities and RMDs: The SECURE 2.0 Act introduces provisions to make certain annuities more attractive within retirement plans. It allows certain types of annuity payments and clarifies qualifying longevity annuity contracts (QLACs) rules, including increasing the dollar limit to $200,000 and removing the 25% account balance cap.

5. RMDs for Surviving Spouses: Surviving spouses can now elect to be treated as the deceased account owner for RMD purposes, potentially delaying the start of RMDs if the surviving spouse is younger than the deceased. This election is irrevocable and requires notifying the account administrator.

6. Qualified Charitable Distributions (QCDs): The annual limit for QCDs, which count toward RMDs, is now indexed for inflation, starting at $105,000 in 2024. A one-time QCD of up to $50,000 is also allowed through certain charitable remainder trusts or gift annuities.

Why These Changes Matter 

The recent adjustments to RMD rules are more than just technical updates—they bring valuable flexibility that can significantly benefit retirees. Here are some of the primary advantages of these changes:

1. Enhanced Growth Potential for Retirement Savings: Delaying RMDs means retirement accounts can stay invested and grow tax-deferred for longer. This change can be particularly beneficial for retirees who do not immediately need income from their retirement accounts, as it gives their investments more time to compound, potentially increasing their overall retirement nest egg.

2. More Control Over Roth 401(k) Withdrawals: With the removal of RMD requirements for Roth 401(k) accounts, retirees now have the same control as they do with Roth IRAs. This means they can choose when or if they want to withdraw from these accounts, providing a tax-free income source that can be preserved and used strategically within their broader retirement plan.

3. Reduced Penalties for Missed RMDs: The lower penalties for missed RMDs, combined with an opportunity for further reduction if corrected promptly, provide relief for retirees who may inadvertently miss their RMD deadline. This change reduces the financial impact of an honest mistake, making the RMD system more forgiving and manageable.

4. Options for Legacy and Charitable Planning: The increased flexibility around QCDs and the inflation-indexed annual limits make charitable giving a viable strategy for retirees looking to meet their RMD requirements while supporting causes they care about.

How to Calculate Your RMD in 2025

Calculating your Required Minimum Distribution (RMD) in 2025 is straightforward, with a few key steps. The IRS provides tables that determine your life expectancy factor based on your age, which you’ll use to calculate your RMD. Here’s a step-by-step guide:

  1. Determine Your Account Balance: Start with your retirement account balance as of December 31st of the previous year. This amount will serve as the basis for your RMD calculation.
  2. Find Your Life Expectancy Factor: Using the IRS Uniform Lifetime Table, locate the life expectancy factor corresponding to your age. This factor is updated periodically, so make sure you use the latest table for accuracy.
  3. Calculate the RMD: Divide your account balance by the life expectancy factor. The result is the minimum amount you must withdraw from your account for the year.

Below is a portion of the IRS Uniform Lifetime Table to illustrate life expectancy factors by age:

Source: Internal Revenue Service (IRS)

Common Mistakes to Avoid

Navigating RMDs can be challenging; even small missteps can have significant financial consequences. Being mindful of some of the most frequent pitfalls can help you protect your retirement savings and maximize the benefits of these withdrawals. Here are three key mistakes to watch out for when planning your RMDs:

  • Missing the Deadline: Missing your RMD deadline can lead to hefty penalties. Know your required distribution date and withdraw the correct amount.
  • Not Planning for Taxes: RMDs can push you into a higher tax bracket. Working with a fiduciary advisor can help you create a strategy to manage these distributions in a tax-efficient manner.
  • Overlooking Beneficiary Designations: Your beneficiaries will have their own RMD requirements based on the inherited RMD rules. Regularly review your designations to align with your estate and financial goals.

Working with a fiduciary can help ensure that your RMDs are managed to align with your financial goals and help you make the most of your retirement savings.

Working With an Advisor 

New tax laws, potential shifts in Medicare premiums, income bracket adjustments, and evolving rules around charitable giving mean that your retirement income strategy may need some fine-tuning. Staying informed is essential for making the most of these adjustments and preparing your RMDs effectively.

At Agemy Financial Strategies, we provide personalized insights into your RMD responsibilities and tax-efficient strategies to help you manage these distributions. Our fiduciary advisors are dedicated to helping you meet your RMD obligations while optimizing your financial situation within IRS guidelines. We’ll work closely with you to assess your income needs in retirement and develop a plan that aligns with your financial goals and adapts to new regulations.

As part of our commitment to supporting your financial well-being, we offer tools like our free online RMD Calculator to help you estimate your required withdrawals. For more details on our services, please see our service offerings page here.

Final Thoughts

Navigating RMDs effectively requires staying informed about changing rules and understanding how these mandatory withdrawals impact your retirement income. Planning, keeping abreast of IRS updates, and consulting with financial advisors can help ensure that RMDs work in your favor while minimizing tax liabilities.

At Agemy Financial Strategies, our team is here to provide personalized guidance and support tailored to your financial needs and goals. Let us help ensure your tax obligations are appropriately managed throughout your retirement.

Preparing for 2025 doesn’t have to be overwhelming—let us help guide you toward a well-planned and prosperous new year. Contact us today to schedule your complimentary consultation.

Disclaimer: The information provided in this blog is for educational purposes only and is not intended as specific financial or investment advice. Each individual’s financial situation is unique, and any changes to your retirement income strategy or RMD planning should be discussed with a qualified financial advisor. We recommend consulting with our team at Agemy Financial Strategies to ensure your decisions align with your financial goals, risk tolerance, and the latest IRS regulations.

/by

Maximizing Income from Investments: Strategies for a Steady Cash Flow

, , ,

Financial independence often takes center stage in retirement planning for high-net-worth individuals (HNWIs), with 80% prioritizing it as their top personal finance goal. Building a portfolio that generates reliable income while preserving wealth is essential to achieving that independence.

In this blog, we’ll explore key strategies to help you maximize income from your investments and help a steady cash flow. We’ll also discuss how to strike the right balance between growth and income and how our fiduciary advisors can help tailor a plan that aligns with your unique financial needs and retirement goals. Here’s what you need to know.

What is Cash Flow Investment? 

Cash flow investing is a strategy focused on generating a steady and reliable income stream from various assets. Unlike growth-oriented investments, which aim primarily at capital appreciation, cash-flow investments help prioritize regular income through dividends, interest payments, or rental income.

Typical cash flow investments include dividend-paying stocks, bonds, real estate, and certain types of annuities. For HNWI approaching retirement, cash flow investments are essential for helping maintain a consistent income and meet living expenses without selling off assets. This strategy helps promote liquidity while preserving long-term financial security.

When selecting cash flow investments, HNWIs should carefully evaluate factors like:

  • Return on investment.
  • Payment frequency.
  • Tax efficiency.
  • Principal growth potential.
  • Risk management.

Let’s take a closer look at some of the best cash flow investments for HNWIs. Five options to discuss with your advisor include:

1. Real Estate Investments

Real estate investments, whether through direct ownership or Real Estate Investment Trusts (REITs), offer the potential for passive income and long-term growth. Rental properties, for example, can provide a steady monthly cash flow, while REITs give investors access to the real estate market without needing hands-on management.

Here’s why many investors choose to include real estate in their portfolios:

  • Steady Cash Flow: Investing in rental properties or certain real estate funds can generate consistent income through tenant payments.
  • Diversification: If your portfolio already includes stocks or bonds, adding real estate introduces diversification. Real estate tends to move independently from other asset classes, offering a different risk and return profile.
  • Tax Benefits: Owning rental property comes with tax advantages. For instance, depreciation on the property can reduce your taxable income. In some cases, property losses can be used to offset other taxes.
  • Tangible Asset: Unlike some investments that exist only on paper, real estate is a tangible asset. Even if property values fluctuate, it remains useful and can continue to generate income through rent.

Before investing in REITs, it’s essential to consult with an investment professional, such as a fiduciary advisor. They can help you evaluate potential risks and ascertain whether REITs align with your financial objectives and overall investment strategy.

2. Dividend-Paying Stocks

Dividend-paying stocks offer a combination of income and growth potential. These stocks represent shares of companies that regularly distribute a portion of their profits to shareholders in the form of dividends. For HNWIs, dividend stocks can provide a steady stream of income while still allowing for capital appreciation over time.

One of the greatest benefits of dividend-paying stocks is that they have historically outperformed their non-dividend-paying counterparts during market volatility. A report by Hartford Funds showed that from 1940 to 2023, dividend income contributed an average of 34% to the total return of the broader market. This makes them an appealing choice for retirees who want to protect their wealth in unpredictable markets.

While dividend-paying stocks can be valuable to a retirement income strategy, they are not without risk. Consulting with an advisor can help determine whether this investment aligns with your financial goals.

3. Bonds and Fixed-Income Securities 

Bonds are a reliable choice for generating a steady income. Government, corporate, and municipal bonds offer regular interest payments, providing predictable cash flow. With interest rates stabilizing in 2024, bonds remain viable for income-seeking investors. Beyond bonds, other fixed-income options include:

  • Certificates of Deposit (CDs): CDs are low-risk time deposits from banks and credit unions, offering fixed interest over a set term. While less flexible than bonds, they’re FDIC-insured up to $250,000, making them a safe investment.
  • Preferred Stocks: Preferred stocks are hybrids offering fixed dividends like bonds and potential capital appreciation. While they can provide higher yields, they come with more risk since dividends aren’t guaranteed.
  • Bond Funds: These offer diversification by investing in a mix of bonds (government, corporate, municipal). Bond funds provide a diversified income stream but may come with management fees and interest rate risk.

Collaborating with a fiduciary adds another layer of benefits and security. At Agemy Financial Strategies, our fiduciaries can assist you in carefully evaluating each investment opportunity and optimizing your financial strategy for retirement.

4. Consider Annuities for Guaranteed Income

Certain annuities can be a valuable addition to a portfolio for HNWIs looking for guaranteed income. An annuity is a contract with an insurance company that guarantees current or future payments in exchange for a premium or series of premiums.

Fixed Annuities offer guaranteed interest rates and predictable income payments, providing stability that isn’t influenced by market fluctuations. They are ideal for conservative investors who want a reliable cash flow throughout retirement without worrying about market volatility.

5. Dollar-Cost Averaging

Dollar-cost averaging requires the investor to invest the same amount of money in the same stock on a regular basis over time, regardless of the share price. The number of shares purchased each month will vary depending on the share price of the investment at the time of the purchase. The idea being when the share value rises, your money will buy fewer shares per dollar invested. When the share price is down, your money will get you more shares. Over time, the average cost per share you spend should compare quite favorably with the price you would have paid if you had tried to time it.

Partnering with an advisor can provide valuable guidance in making the right choice.

Having a Tax-Efficient Strategy

Maximizing income from your investments isn’t just about how much you earn but also how much you keep. Tax-efficient investing is vital in maintaining steady cash flow, especially for HNWIs who may be subject to higher tax brackets.

  • Utilizing Tax-Advantaged Accounts: Contributing to tax-advantaged accounts such as IRAs, 401(k)s, or Roth IRAs can help minimize the tax impact on your investment income. While traditional IRAs and 401(k)s allow for tax-deferred growth, Roth IRAs offer tax-free withdrawals in retirement, making them an excellent option for generating tax-efficient income later in life.
  • Tax-Loss Harvesting: This strategy can help reduce the taxes you owe on your investment gains. This involves selling underperforming investments at a loss to offset capital gains from other assets. By strategically harvesting losses, you can lower your overall tax bill and retain more investment income.

Creating a Withdrawal Strategy

Maintaining income without prematurely depleting your investment portfolio is key for HNWIs looking to develop a sustainable withdrawal strategy. Your approach will depend on your retirement goals and risk tolerance. A dynamic withdrawal strategy offers flexibility by adjusting withdrawals based on portfolio performance and market conditions.

When markets are strong, you can increase withdrawals slightly; reducing withdrawals helps preserve capital during downturns. Working with a fiduciary advisor can help you implement a dynamic strategy that balances your immediate income needs with the long-term health of your portfolio.

Work with a Fiduciary to Tailor Your Investment Strategy 

Each investor’s financial situation, risk tolerance, and retirement goals are unique. At Agemy Financial Strategies, we pride ourselves on providing personalized, fiduciary-based advice that prioritizes your best interests. Here are some of the areas we can help you with:

  • Investment Management: Our fiduciaries perform extensive research and analysis of financial instruments and market trends to make well-informed investment decisions. We craft and implement tailored strategies, allocate assets effectively, and manage risk to help optimize your portfolio.
  • Financial Planning: We offer financial services that consider your entire financial picture. This includes assessing your income needs and developing a strategy to generate steady cash flow while preserving your wealth for future generations.
  • Risk Management: As you approach retirement, managing risk becomes even more critical. Your advisor can help you optimize your asset allocation to meet your income needs while minimizing the risk of portfolio depletion.
  • Ongoing Portfolio Monitoring: Maximizing income from your investments requires ongoing portfolio monitoring and adjustments. We continuously review your investments to ensure they align with your financial goals, market conditions, and evolving retirement needs.

Final Thoughts

Maximizing income from your investments is essential for ensuring a successful and financially secure retirement, especially for high-net-worth individuals approaching this important life stage. At Agemy Financial Strategies, we craft tailored plans to meet your unique investment goals, helping provide stability and growth. Our team of dedicated fiduciary advisors is committed to guiding you through the complexities of investment management with advice and ongoing support.

Take the next step toward a secure financial future—contact us today to schedule your complimentary consultation.

 

Disclaimer: The information provided in this blog is for educational purposes only and should not be considered as specific investment advice. While we aim to provide valuable insights, every individual’s financial situation is unique, and changes to your investment portfolio or financial strategies should only be made after consulting with a qualified financial advisor. We encourage you to contact our team before making any investment decisions to help ensure they align with your personal goals and risk tolerance.

/by