At 66, They Will Pay Cash for the $450,000 Condo They Retire To From His IRA to Skip a Mortgage. Medicare Will Count the $450,000 as Income and Raise Both Their Premiums in 2028

A married couple, both 66, find the condo they want to retire to. It costs $450,000. They want to own it outright, so they plan to withdraw $450,000 from his traditional IRA this year, before accounting for the taxes they’ll owe. Two years from now, Social Security will send each of them a letter with a Medicare bill neither one planned for.

Most retirees will never get that letter. The income surcharge (IRMAA) hits only roughly 8% of people with Medicare Part B. A couple filing jointly with modified adjusted gross income (MAGI) at or below $218,000 pays the standard $202.90 monthly Part B premium. One large IRA withdrawal pushes this couple far past that line.

Paying Cash Still Creates Taxable Income

Withdrawals from a traditional IRA are generally taxable, and using the money to buy a home doesn’t change that. The withdrawal goes on Form 1040, line 4b and flows into adjusted gross income. Social Security then sets IRMAA from MAGI, which it defines as your total adjusted gross income and tax-exempt interest income. Interest from municipal bonds that looks tax-free counts too.

Social Security works from the tax return the IRS sends it, which usually covers the year two years back. A 2026 withdrawal sets the 2028 premiums. If they withdraw the money by December 31, it counts toward their 2026 income. Waiting until January moves the withdrawal into 2027, potentially affecting their 2029 Medicare premiums instead.

Form SSA-44 offers no way out. It covers income drops tied to life-changing events such as stopping work, divorce, or a spouse’s death. A voluntary withdrawal to buy a condo does not qualify, however much it raised MAGI.

Two Spouses, Two Medicare Surcharges

Assume $100,000 in other household MAGI (pension, dividends, the taxable share of Social Security) on top of the withdrawal, for $550,000 total. That puts them in the joint bracket above $410,000 and below $750,000. Each spouse enrolled in Part B and Part D pays the surcharge separately.

The Part B surcharge alone comes close to the headline figure. Adding Part D brings the couple’s extra Medicare cost to $12,710.40 for 2028 at today’s rates. Each spouse’s total Part B premium rises to $649.20 a month, and the Part D surcharge sits on top of whatever their drug plan charges. IRMAA is only one of several Medicare line items that surprises retirees, and we mapped the rest in a free guide to Medicare’s hidden bills. All of that comes before the income tax on the withdrawal. Paying that tax from the IRA means withdrawing even more, which pushes MAGI higher still.

Could They Split the Condo Funding?

Each funding source hits MAGI differently:

• Existing cash: adds nothing to MAGI.
• Taxable brokerage sales: only the realized gain counts. The cost basis comes back untaxed.
• Smaller IRA withdrawals over several years: Four annual withdrawals of $112,500 would put MAGI at $212,500 each year, assuming their other income stays unchanged. That’s below the 2026 surcharge threshold, although future limits and borrowing costs will affect the savings.
• Borrowing: a mortgage or home equity line covers the closing, and the annual IRA withdrawals pay it down.

A half measure barely helps. If they split the money equally across December 2026 and January 2027, MAGI hits $325,000 in each year. That lands in the $274,000 to $342,000 bracket, where the couple pays $11,539.20 in surcharges over two years. That is barely less than taking the full hit at once.

The numbers favor comparing cash, low-gain investments and financing before taking a large IRA withdrawal. Spreading withdrawals across several years may help control both taxes and Medicare premiums. Borrowing costs could outweigh the Medicare savings, especially if interest rates stay high. They need to compare those costs against the income taxes and surcharges triggered by a larger IRA withdrawal. Widowhood can change the math too. A surviving spouse may eventually face the lower single-filer threshold of $109,000. Withdrawals sized for a couple can push a survivor into a surcharge.

What to Review Before Closing

1. Calculate your starting MAGI. Take last year’s Form 1040, add line 11 to line 2a, and you have the figure Social Security will use before any withdrawal.
2. Have a CPA price each funding mix. Compare the income tax, withholding, IRMAA tier, and loan interest for a one-time withdrawal against a four-year schedule. Do it before you sign the purchase contract, since the year they withdraw the IRA money determines when the income counts.
3. Check both spouses’ coverage. Each spouse enrolled in Part B and Part D pays a separate surcharge. Map out the 2028 and 2029 premium years before any money leaves the IRA.

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