Healthcare in America — On the Sidelines – Retirement and That Piggy Bank, Your Home
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Retirement and That Piggy Bank, Your Home
Here is something many people approaching retirement probably should know, but may never have thought about.
Your home may be your largest retirement asset. And in some parts of the country, what was once an ordinary middle-class house has become an extraordinarily valuable asset.
Over the past several decades, and particularly during the housing boom surrounding and following the COVID years, real estate values in many areas have risen dramatically. A house purchased 20 years ago for $300,000 might today sell for $550,000, $700,000 or considerably more.
I have seen an even more dramatic example in the Seattle area, where a house originally purchased for around $300,000 eventually sold for just under $800,000.
I can give you two examples from my own history.
I bought a 1,300-square-foot Craftsman home in Torrance, California, in 1975 for $32,000. Today, Zillow estimates that same house at roughly $1.6 million.
And then there is the house I sold in 1967 for, again, $32,000. It was in Manhattan Beach, one block from the ocean. Zillow now puts the value of that property at roughly $5.5 million.
Those are real numbers.
And they help explain something you see in expensive parts of the country: homes that have been in families for generations are often passed from one generation to another rather than sold. The family may not be able to afford to buy a comparable house today, but selling the old one can mean giving up an asset they could never replace.
But that isn’t really the point of this sidebar.
The point is what can happen when you finally decide to turn some of that home equity into retirement money.
Your House Can Affect Your Medicare Bill
Medicare has something called IRMAA — the Income-Related Monthly Adjustment Amount. It is an additional charge added to Medicare Part B and Part D premiums for people whose income is above certain levels.
And here is the part that catches people by surprise:
Medicare is looking at your income, not your net worth.
You can have a $2 million house and relatively modest retirement income and not owe IRMAA because of the house.
But sell that house and realize a large taxable gain, and suddenly the income picture can change.
The IRS generally allows a homeowner to exclude up to $250,000 of gain on the sale of a qualifying primary residence, or up to $500,000 for a qualifying married couple filing jointly. But that is an exclusion of gain, not a blanket exemption from all the consequences of a profitable sale. Any gain that cannot be excluded can become taxable income.
And that is where retirement planning gets interesting.
Suppose a married couple has owned a home for many years and realizes a $700,000 gain when they sell it. If they qualify for the $500,000 exclusion, there could still be $200,000 of gain that is potentially taxable.
Now add Social Security, pension income, IRA withdrawals, 401(k) withdrawals, investment income and other taxable income.
That one home sale could push their income into a completely different Medicare bracket.
The Medicare “Cliff”
For 2026, an individual with Medicare who has modified adjusted gross income of $109,000 or less generally pays the standard Part B premium.
For a married couple filing jointly, the threshold is $218,000.
But go even one dollar over the applicable threshold and you move into the next IRMAA bracket. That doesn’t mean you pay a surcharge on that one extra dollar. It means the higher premium applies to the entire Medicare year. That’s why people sometimes describe IRMAA as an income “cliff.”
For 2026, the standard Part B premium is $202.90 per month. In the first IRMAA bracket, the Part B surcharge is another $81.20 per month, and the Part D surcharge is another $14.50 per month for people who have prescription drug coverage.
That’s $1,322.40 a year in additional Part B and Part D premiums for one person if both apply.
And that is only the first step. The higher-income brackets become substantially more expensive.
There is another wrinkle that makes this particularly easy to miss.
Medicare generally looks back two years.
For 2026 premiums, Social Security generally uses information from your 2024 federal tax return. So you could sell your house in 2024, pay whatever taxes are due, move on with your life — and then discover in 2026 that your Medicare premiums have gone up because of that earlier income.
In other words, you may have forgotten about the home sale by the time Medicare catches up with it.
And Then There Are Your Retirement Accounts
The house isn’t the only thing that can push you over an IRMAA threshold.
Traditional IRAs and 401(k)s are another potential problem.
Once required minimum distributions begin, money coming out of traditional tax-deferred retirement accounts generally becomes taxable income. And that income is included in the calculation Medicare uses for IRMAA.
This creates an interesting retirement-planning problem.
You may have spent your working years putting money into tax-deferred accounts because that was financially smart at the time. But eventually the government wants its tax money, and those withdrawals can affect more than just your income-tax bill.
They can also affect what you pay for Medicare.
So What Can You Do?
This isn’t a “do this and save thousands” situation. Everyone’s circumstances are different. But there are planning tools worth knowing about.
One is Roth conversions. Before required minimum distributions become a major factor, some people gradually move money from traditional IRAs into Roth IRAs and pay the tax along the way. Done carefully, this can reduce future RMDs.
But there is a catch: the conversion itself creates taxable income in the year you do it, so careless conversions can create the very IRMAA problem you’re trying to avoid.
Another tool is the Qualified Charitable Distribution, or QCD.
Once you reach age 70½, you can have money transferred directly from an eligible IRA to a qualifying charity. In 2026, the annual QCD limit is $111,000 per individual. For someone who is subject to RMDs, a qualifying QCD can count toward that RMD while generally not being included in taxable income.
That distinction can be important because reducing taxable income can also help keep you below an IRMAA threshold.
And if your income drops because of a recognized life-changing event, Social Security allows you to request a reduction in your IRMAA using Form SSA-44. But don’t assume that form will simply erase the consequences of a large voluntary home sale or other one-time taxable transaction. Its rules are more specific than that.
The Point of This Sidebar
I’m not a tax professional, and this isn’t tax or legal advice.
It is a heads-up.
We tend to think of retirement as a simple equation: Social Security + pension + IRA + 401(k) + whatever is left in the bank.
But retirement income doesn’t exist in isolation.
The tax code, Social Security, Medicare premiums, required distributions, investments and even the sale of your home can all interact.
And sometimes the biggest surprise isn’t the tax bill when you sell the house.
It is the Medicare bill that arrives later.
So if you are approaching retirement, or already retired, and you are thinking about selling a home that has appreciated substantially, don’t look only at the sale price and the capital-gains tax.
Look at what that sale does to your income.
Because your house may be your biggest piggy bank.
And Medicare may be standing nearby, waiting to see how much you put into it.
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