Selling Company Stock at 63: A Kestrel Bay Retirement Advisors Walkthrough of IRMAA

How does the IRMAA table treat a sale at 63?

Medicare reads your tax return from two years back. The return for the year you turn 63 sets the premium you pay in the year you turn 65, and the 2026 premiums were set by 2024 income. So a sale at 63 is not a 63-year-old's problem. It's a 65-year-old's problem, and you can't undo it by then.

The yardstick is modified adjusted gross income, meaning adjusted gross income plus any tax-exempt interest. Only the gain lands in that number. If you sell shares for $400,000 and your basis was $300,000, you've added $100,000 to MAGI, not $400,000. For RSUs sold right at vest, the gain may be tiny, because the vest was already taxed as wages.

For a joint return in 2026, the total Part B premium per person is $202.90 up to $218,000 of MAGI, $284.10 up to $274,000, $405.80 up to $342,000, $527.50 up to $410,000, $649.20 below $750,000, and $689.90 at $750,000 or more. Single filers face lower lines, with the first at $109,000. Those amounts move every year, so treat them as a way to see the shape of the cliff.

Before Kestrel Bay Retirement Advisors suggests dates for a sale, we put the income tax on the gain and the Part B premium it will cause on one page. Clients are often surprised which number is bigger.

Gwen and Sam: $400,000 of gain in one year or spread out

Hypothetical: Gwen and Sam are 52 and 53 today. She's a VP of sales at a software company that recently went public, and he teaches high school and will have a state pension. Picture them a decade from now, about 63, filing jointly with $130,000 of other income and $400,000 of gain sitting in company shares. For simplicity, both enroll in Medicare in the same year.

Sell it all in one year and MAGI becomes $130,000 + $400,000 = $530,000. Part B is $649.20 a month each. That's $446.30 above the $202.90 base ($649.20 - $202.90), so $446.30 x 12 x 2 = $10,711.20 extra for the couple for one year.

Split it into four sales of $100,000 and MAGI each year is $230,000, just over the first line. Part B is $284.10 each, $81.20 above base. Times 12 months and two people is $1,948.80 a year, or $7,795.20 over four years. That saves only $2,916 compared with the one-year sale ($10,711.20 - $7,795.20), which surprises most people.

Five sales of $80,000 keep MAGI at $210,000, under the $218,000 line, so the surcharge is zero. The price is five years of carrying unsold shares. The table puts all four paths side by side; notice that the four-year plan barely beats the one-year sale, while the five-year plan wins outright.

What does spreading a sale gain you, and what does it cost?

Spreading helps in two ways and hurts in two. Here are both sides, with the numbers from Gwen and Sam's case. Investing involves risk, including loss of principal, and the second list is where that shows up.

• Pro: staying under the $218,000 joint line saves $81.20 a month per person at the first tier, and $446.30 a month per person if you'd otherwise land in the $649.20 tier.
• Pro: smaller yearly gains may keep more of the profit at lower capital gains rates (check the current IRS limit).
• Con: shares you haven't sold stay exposed to price drops. A 10% fall on $300,000 still unsold is $30,000, more than the premium saved in the four-year plan.
• Con: more years means more trading windows, more estimated tax payments, and a plan you have to rerun whenever the IRMAA table changes.

What do people get wrong about IRMAA and a stock sale?

Four beliefs show up in nearly every first conversation, and each one skews the plan. The first is that Medicare uses this year's income. It doesn't. It uses the return from two years earlier, so the sale you make at 63 is the one that appears at 65.

The second belief is that the full sale price counts. Only the gain does. Sell $400,000 of stock with $300,000 of basis and you've added $100,000 of income, which can be the difference between staying under a line and crossing it.

Third, people think a surcharge sticks for life. It's recalculated every year, so one big year raises premiums for one year, then they fall back if income does. Fourth, many assume IRMAA only follows wages. Capital gains, interest, fund distributions and Roth conversions all feed the same MAGI number.

Mistakes to avoid in the two years before Medicare

The costliest one is selling a big block at 63 or 64 because income feels low after leaving work, then learning at 65 that Part B is $649.20 a month instead of $202.90. In Gwen and Sam's case that's $446.30 more a month each, $5,355.60 a year per person, for a sale that could have been staged. Leaving a job doesn't reset the lookback.

Second, people forget the other income. A December capital gain distribution from a mutual fund, a Roth conversion, or one last RSU vest can push you $1 over a line. We leave a cushion of about $10,000 for exactly this reason.

Third, couples overlook the age gap. If one spouse is a year older, that person's lookback year comes a year earlier, and the joint return for that year is the one that counts. Fourth, check any ESPP shares sold in a disqualifying sale. The discount on those is ordinary income in the sale year, and it counts toward MAGI like any other income.

How does the answer change with age or position size?

Under 63, a sale can't touch your first Medicare premium, so income tax brackets drive the plan. Gwen and Sam, at 52 and 53, can sell for tax reasons now without a Medicare worry. At 63 and 64 the sale years set Part B for your first two Medicare years, and at 66 a sale lands on premiums at 68.

Filing status matters a lot. A single filer hits the first line at $109,000, half the joint $218,000, so the same gain costs a single reader more. A bigger position stretches the schedule: $400,000 of gain might fit in five years, while $1 million may not fit in any sensible number of years.

Sometimes a year crosses the $410,000 joint line anyway. Then income up to just under $750,000 stays at $649.20, so extra gain in that year adds no Part B (it still adds income tax). We'd rather put the big, unavoidable gain into that year than spread it thin across several, because every tier you stay under is cash you keep.

One limit on all of this. The lines are indexed and change yearly, so the 2026 amounts here are for illustration; use the table in force when your sale year's return sets premiums. The example also leaves out the Part D surcharge, which follows the same income tiers. And nobody should hold a falling, oversized position for years to save a few thousand dollars of premiums.

What should you ask an advisor about IRMAA and a stock sale?

Bring these to the first meeting. A good advisor can answer each with your own numbers, not a general rule.

• Which tax year sets my first Medicare premium, and what is my projected MAGI for it?
• How much gain fits under the next IRMAA line after my pension, interest and fund distributions?
• What income tax does spreading the sale save or cost, compared with the Part B premium it saves?
• How much price risk am I carrying on the shares I haven't sold yet, and what would a 10% drop cost?
• If I retire in the sale year, will you help me file the request to use a lower income?

A checklist for the sale year, and how we can help

The decision rule is arithmetic. Take the IRMAA line just above your expected other income, subtract that income, and the difference is the gain you can realize in one year without moving up a tier (in the 2026 table, $218,000 married or $109,000 single). Then hold back about $10,000 for late interest and distributions. Retirement can also let you ask Social Security to use a lower income, so a big sale in your last working year isn't always a lost cause.

Kestrel Bay Retirement Advisors can run this checklist with you on a video call or by phone, alongside your equity compensation and your Roth conversion plans. Use the request form if you'd like us to start with your own numbers.

• Write down the two lookback years: the year you turn 63 and the year you turn 64.
• Project MAGI from all sources: vests, ESPP sales, pension, interest, fund distributions and conversions.
• Pick the gain to realize: the line above your income, minus a $10,000 cushion.
• Check the sale date against your company's trading window and your funds' December distribution dates.
• Keep proof of your retirement date in case you request a lower income from Social Security.
• Run the numbers again each year with the current IRMAA table.