Investors can avoid thousands in annual Medicare surcharges by replacing ordinary-income ETFs with funds utilizing return-of-capital distributions or tax-deferred growth strategies.
SPYI uses Section 1256 contracts and return of capital to minimize taxable income, making it IRMAA-friendly.
QQQI classifies up to 99% of distributions as return of capital, reducing MAGI impact.
BOXX pays no distributions, accruing gains in NAV, thus zero IRMAA impact until sold.
ROCY offers tax-deferred yield through return of capital, similar to JEPI but with better tax treatment.
ROCQ provides Nasdaq exposure with return-of-capital distributions to avoid IRMAA cliffs.
JEPI's ordinary income distributions can push retirees over IRMAA thresholds, triggering higher Medicare premiums.
Apple is a top holding in ROCY, mentioned as part of the fund's equity sleeve.
Alphabet is a top holding in ROCY, mentioned as part of the fund's equity sleeve.
NVIDIA is a holding in ROCY, mentioned alongside other large-cap tech stocks.
Microsoft is a holding in ROCY, mentioned as part of the fund's equity sleeve.
Retirees holding JEPI in taxable accounts may inadvertently trigger higher Medicare premiums due to ordinary income distributions. By rotating into tax-efficient alternatives like SPYI, QQQI, or BOXX, investors can manage their Modified Adjusted Gross Income (MAGI) and avoid the IRMAA surcharge cliff.
Distributions classified as ordinary income increase your Modified Adjusted Gross Income (MAGI). If your MAGI exceeds specific thresholds, you become subject to the Income-Related Monthly Adjustment Amount (IRMAA), which increases Part B and Part D premiums.