Retiring with $2 Million in Huntsville, AL

By: Brian Seay, CFA | Capital Stewards

For those retiring with $2 million in Huntsville, the goal has transcended simple "survival." You are now managing a complex financial engine that needs to be tuned correctly to avoid excess taxation and hidden risks.

At Capital Stewards, we believe a $2 million portfolio shouldn't just be a larger version of a $500,000 one. It requires an integrated, institutional-grade approach that works across each area of your financial picture.

1. High-Net-Worth Tax Optimization: Defusing the "Tax Bomb"

With $2 million, your biggest long-term risk isn't a market dip—it’s the IRS mandate known as Required Minimum Distributions (RMDs).

The RMD Trap

If your $2 million is primarily in Traditional 401(k)s or IRAs, your mandatory distributions starting at age 73 or 75 could easily exceed $80,000 annually on top of your Social Security and pensions. This can push you into a 32% or 35% federal tax bracket and trigger significant Medicare IRMAA surcharges, doubling or tripling your healthcare premiums.

• Multi-Year Roth Conversion Ladders: We don't wait for the mandate. We utilize "bracket-topping" strategies to convert portions of your IRA to a Roth IRA today. By paying tax at current rates, you lock in tax-free growth forever and eliminate future RMD stress.

• Qualified Opportunity Zones (QOZs): If you are selling a business or a highly appreciated property in Huntsville, we may utilize QOZs. By reinvesting capital gains into designated areas in North Alabama, you can defer taxes until 2026/2027 and potentially eliminate all taxes on the new appreciation if held for 10 years.

• Asset Location (The 1% Advantage): We place tax-inefficient assets (High-Yield Bonds, REITs) in your IRAs and keep tax-efficient assets (Municipal Bonds, Growth Stocks) in your taxable brokerage accounts. This "layering" can add significant “tax -alpha” to your portfolio

2. Advanced Investment Strategies: Beyond the "60/40"

A $2 million portfolio allows you to build assets that moves beyond just stocks and government bonds, providing diversification and growth opportunities that aren’t as reliant on the S&P 500.

Alternative Assets for Huntsville Retirees

• Private Assets: Just because something is popular doesn’t mean that it’s a good idea. Not all “alternative” and “private” investments are good ideas but there are some places where your portfolio may benefit from owning assets not available in publicly traded funds. Private equity and real estate are two examples where owning part of a commercial office building or a smaller, privately owned company, can provide unique growth opportunities in a portfolio.

• Real Estate Syndications: Instead of the headache of being a landlord in Madison, we utilize syndications. This allows you to own a "piece" of a multi-family or industrial project, providing passive income and significant tax write-offs through accelerated depreciation.

• Direct Indexing vs. ETFs: For your large-cap stock exposure, we often move away from standard ETFs. With Direct Indexing, you own the individual 500 stocks in the S&P. This allows us to perform tax-loss harvesting at the individual stock level—selling a single losing stock to offset a gain elsewhere—even if the overall index is up.

3. The "Success Trap" for Government & Military Veterans

Huntsville is home to a unique class of retiree: the "High-Fixed-Income Millionaire." If you have a military pension, RSA/TVA pension, and Social Security, you are likely already in a high tax bracket before you ever touch your $2 million.

The "Stealth Tax" Management

• Social Security Taxation: We help you manage your "provisional income" to avoid the 85% Social Security tax cliff.

• Charitable Bunching (DAFs): If you support local Huntsville non-profits or your church, we may "bunch" several years of giving into a Donor-Advised Fund (DAF) in a single high-income year to maximize your itemized deductions.

• Qualified Charitable Distributions (QCDs): If you are over 70½, we can send your RMDs directly to a charity. This satisfies your legal requirement but keeps the money off your 1040 completely, preventing it from triggering IRMAA surcharges.

4. Building a Legacy

For the $2 million retiree in Huntsville, estate planning is no longer just about a simple Will—it is about Legacy Planning.

There are hard questions to answer. Should you give assets to your children or grandchildren now or later in life? Should you help them start a business, buy a home or make other significant capital investments. You should be thinking proactively about how you want to use your capital to impact your family and the community around. We help clients work through these major questions. Then, we help tackle the nuts and bolts of estate administration to help minimize taxes and the “administrative friction” your heirs may otherwise experience.

In Alabama, while we don't have a state inheritance tax, your heirs could still face significant federal income tax on inherited IRAs due to the SECURE Act’s "10-Year Rule," which requires most non-spouse beneficiaries to deplete the account (and pay the taxes) within a decade.

We work alongside your legal counsel to move beyond basic documents, implementing strategies like Revocable Living Trusts to avoid the public and often lengthy probate process in Madison County. We also specialize in beneficiary optimization—ensuring that tax-free assets (like Roth IRAs or Life Insurance) go to your highest-income heirs, while taxable assets or charitable bequests are funneled through specialized vehicles like Charitable Lead Trusts (CLTs) or Donor-Advised Funds. Our goal is to ensure that your wealth remains a blessing to your family and the Huntsville community for generations, rather than a tax liability.

Why a Flat-Fee Fiduciary is the Only Choice

At the $2 million level, the traditional "AUM" fee model is broken.

• The Competitor: At a 1% fee, you pay $20,000 per year. Over 20 years, that is more than $400,000 gone assuming your portfolio grows.

• Capital Stewards: We are 100% Fee-Only. We charge a transparent, flat fee for our holistic planning. Whether your portfolio grows to $3M or $4M, you aren't penalized for your success.

Your $2 Million Deserves a Specialized Blueprint

You’ve achieved success; now it’s time for significance. Don’t let a generic plan or hidden commissions erode the legacy you’ve built for your family and the Huntsville community.

Ready for an audit of your situation? Start a conversation with us today.