A Popular Retirement Tax Strategy Could Quietly Raise Your Medicare Premiums by Thousands

If you’re between 62 and 70, a sudden market downturn could ripple across your finances for years — but experts say a few key strategies can keep your plan on track.

Know Your Sustainable Withdrawal Rate First

Before you can protect your portfolio, you need to know what it can realistically support. Your retirement savings don’t just fund leisure — they fund healthcare premiums, prescription drug costs, and out-of-pocket medical expenses long after your last paycheck.

An article from Charles Schwab puts it plainly: “Know how much you can spend. If you haven’t done so already, determine how much you can withdraw from your portfolio each year while maintaining a high degree of confidence that your money will last throughout a 30-year retirement. One common rule of thumb is for retirees to withdraw 4% of their portfolios in the first year of retirement and then adjust that amount for inflation every year thereafter.”

For someone making critical decisions about healthcare coverage and supplemental insurance premiums, this number matters enormously. Knowing your sustainable withdrawal rate tells you what you can afford — not just today, but over the decades ahead. If you’re budgeting for annual premiums, potential surcharges tied to your income, or rising out-of-pocket costs, your withdrawal strategy is the foundation everything else rests on.

Receive your free Pre-Retiree’s Guide to Protecting Wealth in a Volatile Market here.

Cut Spending Strategically, Not Drastically

When markets tumble, the instinct is to panic. A more productive response is to look carefully at where your money goes each month.

NCOA offers a clear framework: track your expenses for two or three months by monitoring bank and credit card statements, separate needs from wants, and trim the “nice-to-haves.” NCOA notes that housing, utilities, food, prescriptions, and insurance are essential expenses, while restaurant dinners, designer golf bags, and pricey weekend getaways are not.

Even small changes add up. NCOA points out that “$150 a month saved is $1,800 a year not withdrawn from your portfolio during retirement.”

Notice what NCOA counts as essential: prescriptions and insurance sit right alongside housing and food. For anyone weighing the cost of healthcare coverage options, those line items aren’t discretionary. They’re fixed. That makes it all the more important to find savings elsewhere, so your portfolio can absorb a market shock without forcing you to cut corners on coverage you need.

Sequence Your Withdrawals Wisely

Not all assets are equal when the market is down. Selling stocks at a loss to cover monthly expenses locks in those losses permanently.

Ameriprise advises: “During a market downturn, consider withdrawing cash and fixed income opportunities first to allow stocks and other investments that are down to recover. To limit or avoid having to sell assets, you may also want to consider taking any interest and dividends on investments in cash rather than reinvesting them.”

Ameriprise also notes that if you’re subject to required minimum distributions (RMDs), you should consider which investments you’ll want to sell to satisfy your RMDs while reinvesting unneeded cash so it can continue to grow for future needs.

This is particularly relevant for retirees who need steady, predictable income to cover recurring expenses like insurance premiums and prescription costs. By drawing from cash and bonds first, you give your equity investments time to recover rather than locking in losses during a temporary downturn.

Consider a Roth Conversion While Markets Are Down

A bear market can create a counterintuitive opportunity. Ameriprise suggests that a market downturn can be an opportune time to convert a traditional IRA to a Roth IRA, as a decline in your portfolio’s value can potentially mean a substantially lower tax bill for the conversion.

Ameriprise explains: “While you’ll owe taxes on the converted funds, you won’t have to pay taxes on the money as it recovers and grows, and Roth IRAs aren’t subject to RMDs. You may be able to save even more on taxes if you can do a conversion while your income is lower, as is often the case for those in the early years of retirement and qualifying Roth assets are inherited by your beneficiaries tax free.”

Why does this matter for someone in the 62-to-70 age range? Your reported income directly affects other costs in retirement. Generally speaking, higher income can trigger increased premiums and surcharges on certain government programs tied to your tax returns from two years prior.

A Roth conversion, when timed thoughtfully, can reduce your taxable income in future years — because Roth withdrawals are not counted as taxable income, and Roth IRAs are not subject to RMDs that would otherwise force taxable distributions. The trade-off is real: you pay taxes now on the converted amount. But if the market is down and your portfolio value is temporarily lower, the tax bill on that conversion is smaller. Once the money is in the Roth, it grows and is withdrawn tax-free.

Diversify Your Income Sources

Relying on a single type of investment to generate your retirement income leaves you exposed. John Stevenson, host of the Guaranteed Retirement Guy Show, explains that diversification is “a key strategy for managing risk and ensuring a stable income during retirement.” He says that allocating investments across various asset types effectively manages risk and protects your retirement portfolio from market volatility.

Stevenson notes that a balanced portfolio typically includes a mix of equities, bonds, cash, and real assets. He identifies geographical diversification as helping to mitigate risks tied to specific economies, and says understanding the correlation between different assets is crucial for constructing an effectively diversified portfolio. Adding alternative investments like real estate investment trusts (REITs) and commodities expands diversification and enhances income streams, according to Stevenson.

For retirees who need reliable cash flow to cover predictable costs — monthly premiums, quarterly prescription expenses, annual out-of-pocket maximums — a diversified portfolio is what stands between you and having to make painful cuts to essential spending during a downturn.

Putting It All Together

A 30% market drop doesn’t have to upend your retirement, but it demands preparation and discipline. The strategies here — knowing your sustainable withdrawal rate, cutting discretionary spending, sequencing withdrawals wisely, exploring Roth conversions, and diversifying income streams — all serve the same goal: making sure your money lasts as long as you need it to.

For anyone in their 60s making high-stakes financial and healthcare decisions, the margin for error is slim. Getting your portfolio strategy right means you can approach every other decision — from coverage choices to prescription planning — with confidence rather than anxiety.

BOTTOM LINE: The steps you take before and during a market downturn determine whether your retirement savings can continue to fund the healthcare coverage and essential expenses you’ll depend on for decades.

Receive your free Pre-Retiree’s Guide to Protecting Wealth in a Volatile Market here.

This article was created by content specialists using various tools, including AI.

This story was originally published March 19, 2026 at 9:47 AM.