Plug These 7 Leaks That Quietly Drain Your Net Worth

By Brett Gottlieb

Building wealth takes years of discipline, but losing it can happen in a fraction of the time through silent, often invisible financial drains. While market downturns get all the headlines, the most significant erosion of wealth often comes from poor tax planning, inefficient asset management, and missed opportunities.

High-income professionals, as well as wealthy individuals and retirees, are particularly vulnerable to these “stealth taxes.” By failing to optimize the “how” and “when” of their financial decisions, they can send hundreds of thousands of dollars to the IRS and state governments unnecessarily. Here are seven of the most common, potentially avoidable ways people drain their wealth.

RSU Timing Mistakes

Restricted stock units (RSUs) are a fantastic tool for compensation, but they are taxed heavily as ordinary income upon vesting. A common mistake is allowing RSUs to vest, and then holding them without a strategy. If the stock price drops, you are left with a loss, but you still owe taxes based on the value at the time of vesting. Furthermore, concentrating too much in one stock—particularly your employer’s—could possibly introduce significant “single-company” risk.

• Potential Plug: Depending on your situation, consider developing a vesting schedule strategy. Many professionals choose to sell all or a portion of their RSUs immediately upon vesting to diversify into a balanced diversified portfolio, avoiding both concentration risk and the heartache of watching tax-laden shares plummet. Work with both your wealth advisor and tax professional to develop the optimal strategy based upon your objectives and tax situation.

Medicare IRMAA Surcharges

Many retirees are caught off guard by the Income-Related Monthly Adjustment Amount (IRMAA). This is a “stealth tax” that triggers higher Medicare Part B and Part D premiums when your modified adjusted gross income (MAGI) exceeds certain thresholds. Because IRMAA relies on a two-year “look-back” (e.g., your 2024 income affects 2026 premiums), a one-time income spike (e.g., selling a business, a large bonus, or a big Roth conversion) can trigger massive penalties.

• Potential Plug: Work with your wealth advisor to “smooth” your income in the years before and during Medicare eligibility. This involves carefully planning when to realize capital gains or take retirement account distributions to avoid crossing the “cliff” thresholds.

RMD Mismanagement

Once you turn 73 (or 75, depending on when you were born), the IRS requires you to take required minimum distributions (RMDs) from traditional IRAs (and 401(k)/403(b) accounts if you still have retirement savings in these). Missing a deadline results in a harsh 25% penalty on the amount not withdrawn (down to 10% if corrected promptly). Beyond the penalty, improperly planned RMDs can push you into higher tax brackets and trigger the aforementioned IRMAA surcharges.

• Potential Plug: Schedule automated RMDs early in the year, rather than waiting until December, to ensure compliance. If you don’t need the income, consider a qualified charitable distribution (QCD) to satisfy your RMD while reducing your taxable income (see below).

Inefficient Charitable Giving

While giving to charity is noble, giving cash (or selling appreciated stocks within a taxable brokerage account to donate the cash) is often inefficient. If you hold securities that have appreciated in value for more than one year, donating those securities directly allows you to deduct the full fair market value while avoiding the capital gains tax you would have paid if you sold them. In addition, for high-income donors, you might avoid the 3.8% tax on investment income that might apply if you sold the stock. Starting in 2026, there are also new rules on charitable giving that need to be followed to fully utilize tax benefits.

• Potential Plug: A better strategy may be to use a donor-advised fund (DAF) to “bunch” several years of charitable contributions into one year, allowing you to itemize deductions if you otherwise wouldn’t. For retirees over 70½, direct QCDs from IRAs are a tax-efficient method. Distributions from DAFs are discretionary; they can be made now or in the future.

Missed Step-Up Basis Opportunities

When you inherit assets like stocks or real estate, they receive a “step-up in basis” to their fair market value at the date of the original owner’s death. This means the decades of appreciation up to the date of the owner’s death are entirely tax-free. A common, costly mistake is selling assets prior to death or, conversely, gifting highly appreciated assets to heirs, since the cost basis of the gifted asset is retained in the ownership transfer, saddling the recipient with the inherent taxes on the appreciation.

• Possible Plug: For aging individuals, holding on to highly appreciated assets until death is often better than selling them, as the tax benefit to heirs outweighs the immediate cash-flow needs. This includes the family home, if possible. It is important to work with a professional to evaluate your specific situation, as step-up basis opportunities vary by asset class and your individual tax situations.

Not Using Asset Location Strategies

“Asset location” is not about what you hold but where you hold it. Many high-income investors make the mistake of holding tax-inefficient assets—such as taxable bonds or high-turnover mutual funds—in regular brokerage accounts, while holding tax-efficient stocks in IRAs.

Improper asset location may cause a “tax drag,” where annual dividends and interest are taxed at high ordinary income rates.

• Potential Plug: Place tax-inefficient investments (bonds) and other high-income investments in tax-deferred accounts (401k/IRA) and tax-efficient investments (index funds, ETFs) in taxable accounts. This simple shift may boost annual after-tax returns appreciably over time, merely due to the lower taxes incurred year to year.

Lack of Roth Conversion Planning

Failing to convert traditional IRA funds to a Roth IRA, especially during lower-income years or before RMDs begin, is a massive missed opportunity. Without this, your retirement account will continue to grow, leading to massive RMDs later in life that are taxed as ordinary income, often at higher rates.

In addition, if the IRA account value is large enough, you may be leaving your heirs with tax headaches later, as their window to withdraw from the inherited IRA and pay the taxes on the distributions is only 10 years. Leaving your loved ones Roth IRAs to inherit may be much more tax-efficient for the family as a whole.

• Potential Plug: Perform a series of partial Roth conversions over several years to “fill up” lower tax brackets, rather than one massive, tax-trapping conversion. This creates a tax-free bucket of money for retirement and reduces future RMD burdens. Annual Roth conversion strategies may be most effective for those who retire early, before Social Security income benefits are claimed. Running hypothetical simulations with your wealth and tax advisors is recommended to determine the most effective timing for your own situation.

Avoid the “Death of Wealth” by 1,000 Cuts

Wealth management can be complex and, unfortunately, wealth is rarely lost in one giant, dramatic event; it is more often eroded by a thousand small, unoptimized, and uncalculated decisions. These seven areas are just a sample of the ways your hard-earned money can leak away to the IRS and be lost due to inefficient planning. By taking a proactive approach to plugging the leaks, however, you can take control of your financial destiny, keeping your money working for you and your family, rather than for the tax authorities.

At Comprehensive Advisor, we help clients navigate these types of wealth management and financial planning concerns. We believe everyone should be able to live the retirement they’ve always wanted and our team of professionals can help you create well-thought-out strategies, designed to help you address your financial needs and concerns.

To inquire about our services and start your journey toward financial success, email us at info@ComprehensiveAdvisor.com or call (760) 813-2125. We look forward to working together.

About Our Advisors

Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees, in business administration and economics, and is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals, and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children.

Our team of qualified professionals have experience in the financial service industry, and our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial strategies for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a comprehensive retirement roadmap to help ensure their assets are preserved and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.

Investment advisory products and services made available through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. Insurance products are offered through the insurance business C.A. Financial & Insurance Services. Comprehensive Advisor, LLC is an Investment Advisory practice that offers products and services through AE Wealth Management LLC (AEWM), a Registered Investment Advisor. AEWM does not offer insurance products. The insurance products offered by C.A. Financial & Insurance Services are not subject to investment Advisor requirements. CA Ins. Lic. #6000262. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. 3896958 – 4/26