15 Sep Will money from stock sales hurt Social Security and Medicare?

Q. If you trade stocks and have capital gains, or sometimes losses, after you are retired and only one spouse trades, how does this affect your Social Security and Medicare costs? We file our taxes jointly.
— Trader

A. We’re glad you’re asking.

Let’s start with Social Security.

If already retired and receiving Social Security benefits, the amount of other unearned income has no impact on Social Security benefits, said Brian Schiess, a certified financial planner with Modera Wealth Management in Westwood.

In other words, there is no threshold at which other unearned income reduces Social Security benefits while retired, he said.

But a couple’s combined income may have an impact on how much of the benefit is taxed.

Couples filing joint tax returns will pay taxes on up to 85% of their combined Social Security benefits if their combined income is over $44,000 in 2021, Schiess said.

If combined income is between $32,000 and $44,000, only 50% of their benefits will be taxed, he said, while if combined income is below $32,000, then none of their benefits will be taxed.

Combined income is your adjusted gross income plus nontaxable interest plus half of your total Social Security benefits, he said.

Premiums for Medicare Part B and D do increase based on higher income, Schiess said.

The premiums increase at certain tiers as modified adjusted gross income (MAGI) crosses over certain thresholds. The higher premiums are known as the Income-Related Monthly Adjusted Amount.

However, he said, those thresholds are based on combined income and both spouse’s Medicare premiums will be affected.

“Income from capital gains and other sources may have an impact on Medicare premiums, but it does not matter if either one or both spouses trade,” he said.

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This story was originally published on Sept. 15, 2021.

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