3 Biggest Mistakes Retirees With $3 Million or More in Savings Make

Having a lot of money might simplify some aspects of life, but it doesn’t mean that everything automatically becomes easy. Granted, the challenges that come with having ample retirement savings are generally preferable to not having enough money saved, but in order to get the most out of your portfolio, it’s important to know what to watch out for.

Read Next: What a Middle-Class Social Security Check Could Look Like in 2025

Try This: The Surprising Way You Can Get Guaranteed Retirement Income for Life

If you have $3 million or more in retirement savings, here are the three biggest mistakes to be mindful of, according to Katherine Fox, founder of Sunnybranch Wealth . Also, be aware of these mistakes even smart people make in retirement .

Sponsored: Protect Your Wealth With A Gold IRA. Take advantage of the timeless appeal of gold in a Gold IRA recommended by Sean Hannity.

Missing Tax Planning Opportunities

Having a lot of retirement savings can lead to large tax bills if you’re not careful about how you withdraw the funds. So, to keep more of your money, it’s useful to plan ahead.

“The most common mistakes I see are retirees who hold the wrong funds in taxable accounts and not considering the overall tax efficiency of their portfolio,” said Fox. “Retirees with $3 million+ might not even know that they’re leaving money on the table if they’re a candidate for tax planning opportunities like Roth IRA conversions or reducing their taxable estate at the state level.”

Another issue is missing out on tax planning when it comes to passing money on to families.

“If retirees with $3 million+ have saved primarily in taxable IRA accounts, they may also be setting their heirs up to pay a huge amount in taxes after their death. This is a recent change due to tax legislation passed several years ago that catches many inheritors off guard and could significantly reduce the amount your heirs receive,” said Fox.

Check Out: 8 States To Move to If You Don’t Want To Pay Taxes on Social Security

Giving money to charity could also potentially be better optimized from a tax perspective.

“I also commonly see retirees with $3 million+ in savings make their annual charitable gifts in cash, one of the most tax-inefficient ways to give money,” said Fox.

The good news is that some aspects of improving your tax situation don’t have to be overly complicated.

“Some fixes, like making charitable gifts from appreciated stock or Qualified Charitable Distributions (QCDs) from an IRA are easy to fix yourself. Even asset location — making sure that you are holding only tax-efficient ETFs in your taxable accounts, may be easy to do for the more confident retiree with a $3 million+ portfolio,” said Fox.

“Other tax planning opportunities, including estate planning strategies to reduce your federal/state taxable estate or Roth conversion strategies for you or your heirs’ future benefit should be explored with help from an attorney, CPA, and financial advisor,” she added.

Spending Too Little

While many people make the mistake of spending too much, the opposite can occur when you have substantial savings.

“Retirees with $3 million+ in savings may be holding themselves to needlessly strict spending standards. It’s much more common that I see retirees who end their life with millions left to give to their children or heirs, not scraping the bottom of the bucket, financially speaking,” said Fox.

“Some retirees may be happy spending less during their lifetime, because they want to leave a sizable portion to their heirs. But some people might be longing to take the trip of a lifetime, or increase their monthly spending to have a more comfortable quality of life,” she added.

Sometimes, they just need a nudge from someone like a financial advisor that they can afford to spend more, noted Fox.

“One strategy that helps many retirees is dynamic spending — pulling more out of their portfolio in years when the market performs well, and less when it is doing poorly. This strategy can help manage wealth and increase spending when appropriate, but it requires diligence and support from a professional advisor,” she added.”

Not Talking to Their Heirs

Lastly, it’s a mistake for wealthy retirees to not talk to heirs about end-of-life and estate plans, said Fox. This issue can be an emotional one, not just a financial matter.

“Your children or heirs may be set to receive a significant amount of wealth after you pass away. If you aren’t including them in conversations about family wealth and your end-of-life plans, you are doing them, and yourself, a disservice,” said Fox. “You also miss an opportunity to share wealth with your heirs now, when you can see them enjoy and use the gifts you give them to build their own lives and start securing their own financial future.”

And because these issues aren’t strictly financial, that can help when it comes to starting these conversations.

“You don’t need to lead with details about your financial life and wealth that you aren’t comfortable sharing. Instead, open the conversation as a simple discussion of wishes at the end of your life. Do you know where you want to live as you age? What plans have you put in place in case of medical incapacity? What and where is the key information your heirs need if something happens to you?” explained Fox.

“Opening these conversations with logistical, instead of financial, details gives you the chance to establish a firm footing for difficult discussions and broaden their scope as you and your heirs are comfortable,” she added.

This article originally appeared on GOBankingRates.com : 3 Biggest Mistakes Retirees With $3 Million or More in Savings Make