How to Build $7,900 a Month in Dividend Income While Minimizing Your IRMAA Risk
Most retirees assume that picking tax-friendly dividend tickers keeps Medicare surcharges at bay, but the actual threat has nothing to do with which funds you own and everything to do with where you hold them.
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To pull in $7,900 a month, or roughly $94,800 per year, from just six holdings, you’d need to have somewhere between $1.5 million and $1.7 million, depending on how you mix things. This is because the yields across these pieces range from 1.7% on the dividend-growth side to roughly 14% on the options-income side.
Currently, the portfolio holds three broad dividend ETFs (Vanguard Dividend Appreciation (NYSEARCA:VIG), Vanguard High Dividend Yield (NYSEARCA:VYM), and Fidelity High Dividend ETF (NYSEARCA:FDVV)), a covered-call sleeve in NEOS Nasdaq-100 High Income ETF (NASDAQ:QQQI), a business development company (a lender to middle-market firms) in Ares Capital (NASDAQ:ARCC | ARCC Price Prediction), and a Treasury sleeve in iShares 0-3 Month Treasury Bond ETF (NYSEARCA:SGOV).
IRMAA’s Uncomfortable Truth
The Medicare income-related monthly adjustment amount, the surcharge tacked onto Part B and Part D premiums for higher-income beneficiaries, is set from modified adjusted gross income two years in arrears. Essentially, every kind of investment income counts. Qualified dividends count. Ordinary dividends count. Treasury interest counts. Even municipal interest, which this portfolio does not hold, gets added back. Picking better dividend tickers does not sidestep the surcharge. A reader who believes otherwise will make an expensive mistake.
What actually decides whether this $94,800 lands in the calculation is where the shares sit. Income inside a Roth never appears in MAGI, either while it compounds or when withdrawn. Income in a taxable brokerage counts the year it is paid, spent, or reinvested. Income inside a traditional tax-deferred account stays out while it compounds, then counts in full when withdrawn. That three-way split is the whole strategy.
How Each Sleeve Lands on the Calculation
The three broad dividend ETFs pay largely qualified dividends. You get favorable tax rates, but they are not specifically excluded from MAGI, as they still count in full. This is the single most confusing point in the entire IRMAA conversation.
Ares Capital pays largely ordinary income, the least favorable tax treatment, with a reported forward dividend of $1.92 and a yield near 9.8%. It is the clearest candidate for tax-advantaged space in the portfolio. SGOV’s interest, currently annualizing at about $3.69 per share against short-bill yields near roughly 4% on the 13-week, is exempt from state tax but fully federal and fully counted. A buyer who reached for Treasuries “for tax reasons” should be clear which tax they actually avoided.
The big exception here is QQQI, and per the fund’s Form 8937 filing for the fiscal year ended May 31, 2025, a large share of distributions was classified as return of capital, meaning roughly 94% to 99% of several monthly payouts did not count as income when received. The catch: return of capital lowers the cost basis of the shares, deferring the tax into a larger capital gain at sale.
Where to Put Each Piece
Ares Capital and SGOV belong inside tax-advantaged accounts first, because their income is ordinary and does the most damage in taxable space. Hold VIG, VYM, and FDVV in taxable, where qualified rates are lowest, accepting that they still hit MAGI. QQQI is the one holding with a real reason to sit in taxable, because its return-of-capital treatment is wasted where nothing is taxed anyway. Roth is the only structure that permanently removes income from the Medicare calculation, which means the reader who wants this $94,800 to be truly invisible had to convert earlier.
What Breaks the Plan
- The two-year lookback. Today’s premium is set by income from two years ago. Restructuring now doesn’t show up immediately, and a one-time event from two years back still drives this year’s bill.
- It moves in steps. Crossing a bracket by a dollar can cost meaningfully more than staying just under it, so the last few thousand dollars of income carry outsized weight.
- Required minimum distributions eventually force the issue for anyone with a large traditional balance, whether they want the cash or not.
- A life-changing event can be appealed, and retirement itself is a recognized category, so an appeal path exists.
- Rebalancing creates capital gains, which also count. Maintaining the portfolio is one of the biggest concrete ways to minimize your IRMAA risk.
A Candid Look at the Holdings
The dividend ETF sleeve has run strongly, with VYM up about 18% over the past year and FDVV up roughly 17%; FDVV’s latest quarterly payout of $0.519 came in well above the prior $0.44, and its forward annualized $2.076 runs above the trailing $1.729, meaning the trailing figure understates it. Ares Capital is the weak link on price, down about 3% over the past year while the equity sleeves rose, so part of its high ordinary-income yield is being returned in the share price. QQQI has the shortest operating history in the group and has not been tested through a full cycle.
Bottom Line
Yes, you can get to $94,800 annually without triggering a Medicare surcharge, but only through careful account location. The one move that matters most is putting Ares Capital and SGOV inside tax-advantaged space and treating Roth capacity as the scarcest resource in the whole plan.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
