Home Depot Says the Housing Market Is Stalled, and a Retiree’s Kitchen Remodel Could Lift Medicare Costs Two Years Later

A stalled housing market is steering more retirees toward remodeling instead of relocating, but a single 401(k) withdrawal for a kitchen upgrade can quietly lead to a higher Medicare premium two years later, often without warning.

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Home Depot (NYSE:HD | HD Price Prediction) continues to describe a housing market that is going nowhere. During its earnings call, CFO Richard McPhail said housing turnover “has never been lower as a percentage of the housing stock” and cited “frozen housing market conditions.” With mortgage rates still high, many homeowners who locked in lower rates years ago have little reason to sell and take on a pricier loan. For some, remodeling has become the more practical choice.

Take a 68-year-old widow with $80,000 in earnings who withdraws $50,000 from a traditional 401(k) to remodel her kitchen. She would face an immediate income-tax hit, along with a possible Medicare premium increase in a later year.

Only about 8% of Part B beneficiaries pay this income-based surcharge, known as IRMAA. If your income remains well below $109,000 for a single filer or $218,000 for a joint filer even after the withdrawal, the Medicare side of the issue does not apply.

How a 401(k) Withdrawal Affects Medicare Premiums

Money taken from a traditional, pretax 401(k) is usually taxed as income in the year it is withdrawn. In this case, the $50,000 distribution increases her adjusted gross income, or AGI. IRMAA is based on modified adjusted gross income, or MAGI, which equals AGI from line 11 of Form 1040 plus tax-exempt interest from line 2a. Even municipal bond interest that is exempt from income tax is included.

Using home equity instead would not affect MAGI because loan proceeds are not counted as income. At current rates, however, that approach comes with interest costs.

Why a 2026 Withdrawal Can Show Up in a 2028 Bill

Medicare generally uses tax information from two years earlier when setting premiums, so 2026 income can influence 2028 Medicare costs. Based on 2026 brackets, here is the per-person comparison:

The lump sum pushes her $21,000 above the 2026 cutoff. At $109,000, she would still pay the standard $202.90 Part B premium, but even a dollar above that threshold lifts the premium to $284.10 under current rules. She would remain below the next bracket, where Part B rises to $405.80 a month.

There are two important caveats. First, the thresholds are adjusted for inflation. The single-filer line rose from $97,000 in 2023 to $109,000 in 2026, so the line for the premium year would likely be higher. Second, income taxes apply first. The withdrawal could also place part of her income into the 24% tax bracket, which begins at $105,700 in taxable income for single filers in 2026. Extra deductions available to people age 65 and older could reduce the final tax bill.

Widowhood can make the math less favorable. As a single filer, she faces the $109,000 threshold, while a married couple filing jointly has a $218,000 threshold. Her $130,000 income would trigger IRMAA as a single filer, but not on a joint return.

Form SSA-44 usually does not help with a voluntary 401(k) withdrawal. Social Security generally limits IRMAA relief to qualifying life changes such as retirement, reduced work hours, marriage, divorce, or the death of a spouse.

IRMAA is one of several Medicare costs that can surprise retirees after income crosses a threshold. A free Medicare guide can help explain the surcharges and coverage gaps that come with them.

Four Possible Ways to Fund the Remodel

• Cash savings. Using money already in the bank does not add to MAGI. Selling appreciated stock in a taxable account, however, does create capital gains.
• Staged renovation. Taking $25,000 in each of two years would keep her income at $105,000 annually, assuming her other income stayed the same. That is below the 2026 IRMAA threshold and could help her avoid higher premiums and tax brackets.
• Roth money. Qualified Roth IRA distributions are excluded from gross income, and qualified Roth 401(k) distributions are as well. That makes Roth funds the cleanest option, though it uses the account with the strongest long-term tax advantages.
• Home equity. Borrowing does not raise MAGI, but interest can erase the Medicare savings. At an illustrative 7.32% rate, $50,000 would produce about $3,660 in annual interest before repayments. Actual home-equity loan rates and costs will vary.

The right choice depends on savings, borrowing costs, and income. For this widow, spreading the withdrawal across two years could lower both taxes and future Medicare premiums.

Check the Numbers Before Taking a Lump Sum

1. Estimate your MAGI early. Start with line 11 plus line 2a from your most recent return, add all planned withdrawals, and compare the total with $109,000 for a single filer or $218,000 for a joint filer. If the total is close, consider taking part in December and the rest in January of the following year. The contractor will not know the difference.
2. Speak with your 401(k) administrator before submitting the request. Ask whether partial withdrawals are allowed and how much tax will be withheld, since plan rules determine whether splitting the withdrawal is possible.
3. If the lump sum has already been taken, plan for a possible premium increase. Medicare recalculates IRMAA every year, so lower income in a later year could bring premiums back down afterward.