Instead of Pulling $150,000 From His IRA at 24%, a 66-Year-Old Will Borrow It Against His Brokerage Account at 7.5%. Here Is When That Will Be Smarter, and When It Will Blow Up

Say you have a 66-year-old retiree with a $1.1 million IRA and a $900,000 taxable brokerage account with a $400,000 cost basis. He needs $150,000 for a new roof and kitchen, and he’d rather not pull it from the IRA. So he plans to borrow it through a pledged-asset line secured by his brokerage holdings. It’s a spot plenty of retirees end up in when most of their wealth sits in tax-deferred accounts. Whether the loan works out mostly depends on how long it stays open.

Three Ways to Raise $150,000, Priced Out

So what does it actually cost him to come up with the $150,000? Here’s how the three options stack up.

• Option A: IRA withdrawal. For a single filer in 2026, the 24% rate applies to taxable income over $105,700. Most of a $150,000 withdrawal lands in that bracket, so the federal bill comes to roughly $36,000 before state tax.

The withdrawal also pushes his income past the first IRMAA level (the Medicare surcharge for higher earners), which starts above $109,000. At that level, Part B rises from $202.90 to $284.10 a month and Part D adds $14.50. That comes to about $1,148 per year. Medicare looks back two years at income, so this bill shows up later.

• Option B: sell brokerage shares. Because his cost basis is low, about $83,000 of a $150,000 sale is taxable gain. At the 15% long-term capital gains rate, the tax is about $12,500. The extra 3.8% net investment income tax only applies to income above $200,000 for a single filer.
• Option C: pledged-asset line. Here he borrows at a variable rate near 7.5% and pays interest only. Nothing gets sold, there’s no taxable event, and there’s no IRMAA hit. First-year interest is about $11,250, and he can’t deduct it because he uses the money personally.

Why Loan Length Matters More Than the Rate

Comparing 7.5% with 24% mixes two different kinds of cost. The tax is a one-time cost, while interest accrues every year the loan remains open. After three years, the interest adds up to $33,750, close to the tax cost of an IRA withdrawal. He still owes $150,000, and he usually repays it with IRA withdrawals that get taxed anyway.

The loan only saves money if he repays it with dollars taxed below 24% and closes it quickly. One way to do that is to repay with smaller annual IRA withdrawals that stay in the 12% or 22% bracket and under the IRMAA threshold.

The rate can also move. The Fed’s upper target rate is 4.00%, up 0.25% from a month ago, and the 1-month Treasury yields 4.11%. So a 7.5% quote is about 3.4 points above short-term rates. These lines float, which means any increase in the benchmark goes straight into his interest bill.

When the Pledged-Asset Line Blows Up

Borrowing $150,000 is only about 17% of the account, which sounds safe. Lenders don’t count every holding at full value, though. A 25% to 30% drop can trigger a maintenance call. If he pledges only part of the account or holds a few concentrated positions, he would have to add cash or collateral or let the lender sell. A 30% decline would take the portfolio to $630,000.

Industry disclosures list market fluctuations that may cause the value of pledged assets to decline as the first risk. If the lender sells, it sells near the low and triggers the capital gains he borrowed to avoid. The second way it fails is when the loan never gets paid off. A retiree who keeps drawing on the line for living expenses ends up paying a floating rate on a growing balance year after year.

Best Path for Most People in This Spot

For most people here, the IRA withdrawal is the worst option. It carries the largest tax bill, triggers the Medicare surcharge, and stuffs years of tax-deferred money into a single tax year.

Selling shares is the clearest default. He pays about $12,500 once, with no ongoing interest, no market-dependent debt, and a sale split between December and January that spreads the gains over two tax years.

The loan works only as a short bridge. It should be paid off within one to three years from next year’s lower-bracket IRA withdrawals. At 66, he also has several years before required minimum distributions begin at age 73. Those years are the time to intentionally fill the lower brackets, and loan repayments can be part of that plan.

Two Checks Before Signing a Loan Agreement

First, compare the three-year all-in cost of the IRA withdrawal and the loan. Set the loan rate one point above the lender’s quote. Then add the tax on the IRA money you’ll use to repay it. Measure that against $36,000 plus the IRMAA surcharge. If the loan doesn’t come out clearly ahead, selling shares costs less.

Second, don’t open the line without a written payoff schedule. Pledge diversified holdings, and keep enough cash or Treasuries outside the line to cover a maintenance call without selling stock in a downturn. Most people get two things wrong here: how long the loan will stay open and how far the market can fall.

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