Gen X: Build Wealth Through Smart Tax Strategies

If you’re a Gen Xer (born 1965-1980) with $500,000 or more in investable assets, your financial life likely has many moving parts. You may be in your peak earning years while juggling college costs for your kids, supporting aging parents, or accumulating as much money as possible for your retirement years.

And with the Great Wealth Transfer already underway, there’s a good chance you’re also inheriting assets that will require thoughtful planning for you and subsequent generations.

Now is the time to consider developing a financial plan that includes smart tax strategies to help you grow your wealth instead of watching more of it slip away to unnecessary taxes.

In today’s article, our Washington, DC CFP® professionals will discuss how you can take advantage of this stage in life with investment strategies designed to reduce tax drag and help your money work harder.

Why Tax Strategy Matters More for Gen X  

Gen X is projected to inherit more than $30 trillion over the next few decades, with many already beginning to receive assets from wealthy aging parents. But an inheritance isn’t a guaranteed wealth booster. It requires careful retirement planning to avoid unnecessary taxes and maximize growth in future years.

If you’re already working with a Washington, DC wealth manager, this firm can assist you in proactively structuring your investments, retirement accounts, and estate strategy to build and protect what you’ve saved and inherited.

Here are some options to consider:

1. Use Asset Location to Minimize Tax Drag  

It matters where you hold certain investments if you hold tax-deferred, tax-free, or taxable accounts:

• High-yield bonds, actively traded securities, and funds belong in tax-deferred accounts like IRAs or 401(k)s. 
• Tax-efficient investments (e.g., ETFs, index funds, municipal bonds) are better suited for personal savings accounts (taxable brokerage accounts).

This strategy, known as asset location, can reduce unnecessary capital gains and income taxes. A Washington, DC retirement planner who understands your whole portfolio can help you optimize this strategy across multiple accounts.

2. Harvest Losses Strategically

Capital gains taxes can eat into your investment returns. Fortunately, as a Gen Xer, you can use tax-loss harvesting to offset gains by strategically selling underperforming investments.

Let’s say you sell a mutual fund at a $10,000 gain. If applicable, you can offset the gain by selling another fund at a $10,000 loss, resulting in zero net capital gains tax. Even better? You can carry excess losses forward to future tax years.

3. Consider Roth Conversions in Lower-Income Years

If you expect your income to increase at some point in the future or believe you will be moving into a higher tax bracket, Roth IRA conversions can be a smart move. By shifting funds from a traditional IRA to a Roth IRA, you’ll pay taxes on the converted amount now, but benefit from tax-free growth and withdrawal.

Timing these conversions in years when your income is temporarily lower can help reduce the impact of capital gains taxes.

This strategy works exceptionally well during lower-income years, such as:

• After a job transition
• During a sabbatical or career break
• Early retirement before Social Security and RMDs kick in

A Washington, DC CFP® professional can help calculate the right amounts to convert without bumping you into a higher tax bracket.

Read our new blog on “Balancing Values and Investments: A Guide for Gen X.”

4. Max Out Tax-Advantaged Retirement Accounts 

As a high earner in your 40s, 50s, and early 60s, tax-deferred savings is still one of the best ways to reduce taxable income.

Be sure to:

• Max out 401(k) or 403(b) contributions ($23,500 in 2025, plus $7,500 catch-up if  you’re 50+).
• Consider Backdoor Roth IRAs if your income exceeds Roth IRA limits.
• Explore HSAs (Health Savings Accounts), which offer triple tax benefits if you’re enrolled in a high-deductible health plan.

Working with a wealth management team in Washington, DC, can help you choose the right mix of tax-deferred and tax-free strategies tailored to your goals.

Plan Ahead for Inheritance Taxes  

Many Gen Xers will inherit substantial, taxable brokerage accounts, real estate, or retirement accounts with significant tax implications.

Key strategies include:

• Step-Up in Basis: Upon inheritance, assets like real estate or brokerage accounts receive a step-up in basis, potentially eliminating capital gains if sold quickly enough.
• Inherited IRAs: Under the SECURE Act, most non-spouse beneficiaries must empty inherited IRAs within 10 years, possibly triggering significant income tax. Coordinating withdrawals over several years can help spread out the tax burden.
• Gifting Strategies: If your parents are still alive, encourage proactive estate planning. Annual exclusion gifts, charitable contributions, and the use of various trust structures can help reduce future estate taxes.

Watch our video on Receiving Inheritance.

Don’t Overlook Charitable Giving Benefits  

If you’re charitably inclined, gifting appreciated stock can offer a double benefit:

1. You avoid paying capital gains tax on the stock’s growth
2. You receive a charitable deduction for the full fair market value

When you are over 70½, Qualified Charitable Distributions (QCDs) allow you to direct IRA distributions to charity, helping you satisfy RMDs without adding to taxable income. Charitable giving is also a clever tactic for reducing the taxable value of inherited assets and fulfilling family legacy goals.

Work With a Fiduciary Who Focuses on Tax Efficiency  

When you work with a fiduciary wealth manager in Washington, DC, you benefit from advice that puts your interests first, not just meeting sales quotas or maximizing product commissions. At Brown|Miller Wealth Management, our team of Washington, DC CFP® professionals works closely with Gen X investors to:

• Create coordinated investment and tax strategies
• Manage inheritances thoughtfully and tax-efficiently
• Implement multi-year planning, not just one-off tax moves

Wealth is best grown with a prudent plan, not just a portfolio management service. With over thirty years of experience guiding families in DC, Virginia, and Maryland, we’re uniquely positioned to help Gen X investors turn today’s earnings and tomorrow’s inheritances into long-term financial independence.

Want to grow your wealth and reduce tax payments along the way?

Connect with a Washington, DC CFP® professional at Brown|Miller Wealth Management and let’s build a plan that fits your lifestyle and legacy.

Disclaimer: This article is intended for informational purposes only, and  not to be a client specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs, and investment time horizon. This report is for general informational purposes only and is not intended to predict or guarantee the future performance of any individual security, market sector, or the markets  generally.

The information provided in this article represents the opinions of  Brown Miller Wealth Management (“BMWM”) and is expressed as of the date hereof and is subject to change. BMWM assumes no obligation to  update or otherwise revise our opinions or this article. The observations and views expressed herein may be changed by BMWM at any time without notice. The information may be based on third -party information, which is deemed reliable, but its accuracy and completeness cannot be guaranteed. BMWM provides links for your convenience to websites produced by other providers or industry related material. Accessing  websites through links directs you away from our website. BMWM is not responsible for errors or omissions in the material on third party websites and does not necessarily approve of or endorse the information provided. Users who gain access to third party websites may be subject to the copyright and other restrictions on use imposed by those providers and assume responsibility and risk from the use of those websites. BMWM will act solely in its capacity as a registered investment advisor and does not provide any legal, accounting or tax advice. Client should seek the counsel of a qualified accountant and/or attorney when necessary. BMWM may assist clients with tax harvesting and we will work with a client’s tax specialist to answer any questions related to the client’s portfolio account. Any tax advice contained herein is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer.