Retired Couple Faces $6,900 IRMAA Surprise After Routine Portfolio Rebalance

A retired couple with a $1.8 million portfolio faced a $6,900 increase in their Medicare surcharges after rebalancing their portfolio. The increase occurred due to a $175,000 capital gain from selling appreciated equities in their taxable brokerage account, which pushed both spouses into two higher IRMAA tiers. IRMAA operates as a cliff, meaning that crossing any threshold by even one dollar triggers the full surcharge for both spouses.

The couple had not planned for this additional Medicare bill, as they had accounted for the federal tax on the capital gains. To avoid such surprises, the couple could have rebalanced their portfolio within their IRA, which would have avoided the taxable event and subsequent increase in MAGI.