Retiring with $1.5 million in Huntsville, AL
By: Brian Seay, CFA | Capital Stewards
When you have $1.5 million saved for retirement in Huntsville, Alabama, your big questions should begin to shift from “will I run out of money” to “is my financial picture optimized to reduce taxes and support all of my goals.” In 2026, the "Millionaire" milestone has shifted. While a seven figure nest egg remain a massive achievement, shifting tax laws mean that your strategy must be more precise than ever.
At Capital Stewards, a fee-only fiduciary retirement planning firm in Huntsville, we specialize in helping retirees turn a $1.5 million portfolio into a reliable, tax-efficient income stream that lasts 30+ years.
1. Advanced Tax Optimization: The "Alabama Raise"
Retiring in Huntsville offers a distinct "tax alpha"—extra return purely from state-level savings. However, without a withdrawal sequencing plan, you could still lose more of your wealth than necessary to federal taxes.
Alabama’s Unique State Exemptions
Alabama is one of the most retirement-friendly states in the U.S. As of 2026, here is how your $1.5 million benefits locally:
Social Security & Pensions: Alabama fully exempts Social Security benefits and income from defined-benefit pensions (like RSA, TVA, or military retirement) from state tax.
The Over-65 Exemption: Huntsville residents aged 65+ receive a $6,000 exemption on taxable retirement income and are exempt from the state portion of property taxes on their primary residence.
No "Death Tax": Alabama has no estate or inheritance tax, allowing you to pass your $1.5 million legacy to the next generation without a state-level haircut.
Tax-Efficient Withdrawal Sequencing
With $1.5 million, you likely have money in three different "buckets": Taxable (Brokerage), Tax-Deferred (Traditional 401k/IRA), and Tax-Free (Roth).
Holistic Withdrawal Strategy from a Fiduciary: We don't just pull from one account. We utilize bracket topping—withdrawing just enough from your Traditional IRA to "fill" the 12% or 22% federal bracket, then using Roth or Brokerage funds for the rest. This prevents you from being pushed into a higher tax bracket or triggering a Medicare IRMAA surcharge.
2. Portfolio Diversification in a "Tech-Heavy" Town
Huntsville’s economy is built on engineering and defense. Many of our clients have portfolios that are inadvertently "tilted" toward the tech, defense and aerospace sectors because of their career history or company stock (like Boeing, Northrop Grumman, or Lockheed Martin).
Moving Beyond the "S&P 500" Concentration
In 2026, the S&P 500 is more concentrated in a few mega-cap tech stocks than ever before. For a $1.5 million retiree, this creates concentration risk.
Diversify Outside of Stocks: We often rebalance portfolios to add exposure to gold, international bonds, real estate and other assets that produce returns while reducing risk. This isn’t the 60/40 portfolio of old with growth stocks and U.S. Treasury Bonds, but rather a group of assets that can provide both returns and diversification across a range of market outcomes.
International Exposure: Many investors are "home biased" because the U.S. has been the main driver of returns for the last decade plus. However, after long periods of U.S. outperformance, other assets tend to move to the forefront. We ensure your $1.5 million includes developed and emerging international markets to capture growth outside the U.S. economy.
3. Solving The "High-Income" Retiree Paradox
For many Huntsville retirees, the primary challenge isn't a lack of income—it’s the "Success Trap." If you are a former government employee (TVA, NASA, FBI) or a military veteran, your retirement often starts with a high floor of fixed income. When you stack Social Security and a pension on top of a $1.5 million portfolio, you face a unique set of tax hurdles that "standard" financial advice often ignores.
In Huntsville, it is common for a household to have $100,000+ in fixed annual income before even touching their $1.5 million investment account. While this sounds like a dream, it creates two major tax pressures:
The Federal Social Security "Tax Cliff": While Alabama does not tax Social Security or military/government pensions, the IRS does.
If your "provisional income" (half of Social Security + all other taxable income) exceeds $44,000 (for a couple), up to 85% of your Social Security benefits become federally taxable.
The Challenge: For high-income retirees, every dollar you withdraw from a Traditional 401(k) or IRA doesn't just trigger its own tax—it can also push more of your Social Security into that 85% taxable bracket.
The IRMAA Surcharge (The "Medicare Tax"): For retirees with substantial income, Medicare Part B and Part D premiums aren't a flat rate. If your Modified Adjusted Gross Income (MAGI) exceeds certain thresholds (starting around $206,000 for a couple in 2026), you are hit with IRMAA surcharges.
These can add thousands of dollars to your annual healthcare costs.
Fiduciary Strategy: We help you manage your "taxable footprint" to stay just below these thresholds by optimizing your account withdrawal strategy, without being constrained by worrying about our commissions.
Strategies for the "Pensions + Portfolio" Household
If you are entering retirement with a strong fixed-income base, your $1.5 million portfolio needs a different job. It shouldn't just be "more income"; it should be "Flexible Capital."
Aggressive Roth Conversions: Since you already have a high income floor, your Required Minimum Distributions (RMDs) at age 73 or 75 could be massive, potentially pushing you into the 32%+ federal tax bracket. We look for "low-tax years" to convert Traditional IRA funds into Roth IRAs, locking in today’s tax rates and eliminating future RMD stress.
Charitable Bunching & QCDs: If you are over 70½ and support local Huntsville charities or your church, we utilize Qualified Charitable Distributions (QCDs). This allows you to send money directly from your IRA to a charity, satisfying your RMD without that money ever showing up as taxable income on your 1040.
Prioritizing "Tax-Location": We place tax-inefficient assets (like high-yield bonds) inside your tax-deferred accounts and keep tax-efficient assets (like index funds or municipal bonds) in your taxable brokerage accounts.
At Capital Stewards, we understand the specific nuances of the Retirement Systems of Alabama (RSA), Federal Employee Retirement System (FERS), and Military Retired Pay. We don't just look at your stocks; we look at the interaction between your service-earned benefits and your private wealth.
4. The Capital Stewards Advantage: Why Fee-Only Matters
At Capital Stewards, we are 100% Fee-Only Fiduciaries. This is critical when you have a $1.5 million + portfolio because:
Conflict-Free Advice: We don't sell annuities, mutual funds or insurance for commissions. Our only agenda is to help our clients accomplish their goals.
We don't charge a percentage of assets (AUM): Most firms charge 1% annually. On $1,500,000, that’s $15,000 every single year. Our flat-fee model ensures you keep more of your wealth. If the market goes up 15%, our fees don’t also increase by 15%.
Integrated Tax Prep: We believe you cannot do excellent financial planning without integrating tax planning. Most advisors don’t even ask for your tax returns. We review your tax returns and even help prepare them through our tax partners if necessary. A good retirement plan is not just investments and withdrawal rates; it should include the execution of planning strategies to keep your tax bill low over the long-term.
Navigate Your Huntsville Retirement
A $1.5 million portfolio is a powerful engine, but it needs a skilled navigator. Whether you are a retired engineer from Redstone Arsenal or a local business owner, your retirement plan should be as robust as the city we live in.
Ready to see a "Stress Test" of your $1.5 million?Start a conversation today for a complimentary consultation. Let’s build a plan that maximizes your Huntsville tax advantages and protects your wealth through smart diversification.