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- Even millionaires can receive government benefits.
- Medicare is one of the best benefits available regardless of net worth.
- Millionaires can defer social security till they are 70.
- Also: 2 Dividend Legends to Hold Forever
Should you have the good fortune to become a millionaire during your lifetime, the good news is that most of your money problems go away. The better news is that even if you are a retired millionaire, there are still several government programs you still qualify for regardless of your income level. You might have thought you didn’t qualify for Medicare or a Health Savings Account, but you very much do, and these aren’t the only programs available.
Social Security Benefits
In the case of social security benefits , this dollar amount is owed to you regardless of your net worth. The benefit amount might be capped, and there are some tax implications since you’ll be earning more from social security, but you still qualify for payouts as soon as they begin.
The good news is that payouts start at 62, but there is a caveat. In the case of a millionaire who isn’t dependent on social security for monthly living, you can defer your payments until you are 70 and receive a larger benefit, albeit with greater tax implications.
Medicare
Not to be confused with Medicaid, which is for low(er)-income individuals, Medicare is essentially medical care for everyone regardless of their net worth. A government-sponsored program, as long as you are a citizen of the United States, you will qualify for Medicare programs.
The downside is that as a higher-income individual, you will likely be subjected to more pay for premiums. This Income-Related Monthly Adjustment Amount (IRMAA) means you will likely pay more for Medicare Part B and Part D premiums.
However, Part A, which covers hospital care, will retain the same premium if you make appropriate contributions through your taxes while working. Of course, as a high-income earner, you may have supplemental medical coverage like a concierge doctor, but Medicare is a great safety net.
IRA and 401K Withdrawals
Unsurprisingly, being a millionaire when you retire can have implications on any IRAs and 401Ks you may have. The biggest news is that both an IRA and a 401K account can be tax-deferred and are used to grow worth toward retirement.
Tax deferments aside, there are some important things to know about these types of programs. First and foremost, at 59.5 years of age, you can withdraw from these accounts without penalty. This means you won’t lose a percentage of the money being removed, but tax implications remain as this becomes income.
In addition, once you turn 73, you are mandated to take Required Minimum Distributions (RMDs), which could also force you into a higher tax bracket. The best thing to do is work with a financial advisor so you can plan early on what the best plan would be related to diversifying your investments to soften any blow around taxes.
Health Savings Accounts
Anyone who qualifies as a millionaire may find that Health Savings Accounts (HSAs) can be compelling tools. HSAs have been specifically designed to help contribute pre-tax money toward high-deductible health plans, which can grow tax-free. Better yet, should you need this money for medical care, you can use money from Health Savings Accounts tax-free, no matter your net worth.
Capital Gains Tax Treatment on Long-Term Investments
The good news is that capital gains tax treatment of long-term investments is not exclusive to retirement. Millionaires have long benefitted from preferential tax options for long-term capital gains.
Any long-term investment, or those held for over a year, can be taxed lower than short-term investments held for less than a year. This is advantageous for high-net-worth individuals who may not need to withdraw money from investment or stock accounts.
As a side benefit, there is also some strategy around taxes, as the tax rate on long-term capital gains is capped at 20%, even for millionaires. This equates to lower rates than they would otherwise pay for their income-based tax bracket, which provides another benefit of long-term capital gain holds.
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