From Kiplinger · · 1m 30s
Retirees Use Tax Strategies to Keep Wealth
Retirees use direct indexing and tax-loss harvesting to protect retirement wealth tax-efficiently.
In brief
Retirees use direct indexing and tax-loss harvesting to protect retirement wealth tax-efficiently. Retirees using direct indexing and tax-loss harvesting can keep more of their wealth through tax-efficient strategies. Originally reported by Kiplinger.
Retirees Shift Focus
Retirees now focus on sustaining, protecting and distributing wealth tax-efficiently rather than growing it.
Direct Indexing Explained
Direct indexing lets investors own individual stocks instead of fund shares for customization and tax optimization.
Tax Alpha Benefits
Direct indexing generates 1% to 1.5% tax alpha annually through strategic trading in nonqualified accounts.
Capital Gains Budget
A capital gains budget helps coordinate Roth conversions and manage Medicare costs without triggering higher taxes.
Tax-Loss Harvesting
Tax-loss harvesting offsets gains by tracking individual positions to smooth tax bills throughout the year.
Roth Conversions
Loss harvesting frees space in tax brackets to convert more IRA assets to Roth at preferable rates.
IRMAA Management
Staying under IRMAA cutoffs keeps Medicare premiums as low as possible through strategic tax planning.
Flexible Withdrawals
Harvested losses carry forward to provide flexibility for withdrawals in later retirement years.
Linda and Bob's Case
Linda and Bob harvested $75,000 in losses over two years to fund a second home without affecting Medicare premiums.
Who Benefits
Investors with brokerage accounts over $250,000 can use direct indexing to manage retirement tax outcomes.
The takeaway
Retirees using direct indexing and tax-loss harvesting can keep more of their wealth through tax-efficient strategies.
