Bond Loss Harvesting at 63: How a $35,000 Bond Loss Offsets a $90,000 Stock Gain, Protects an $80,000 Roth Conversion, and Avoids IRMAA
You're 63, married, and you have a $1.4M portfolio. About $700,000 sits in traditional IRAs and 401(k)s, $150,000 in a Roth, and $550,000 in a taxable account. Two things happened in that taxable account this year. Your stocks are up, with $90,000 of gains you'd like to take off the table. Your bond fund is down about $35,000 because yields jumped.
Most people treat the bond loss as a source of annoyance. It can be a tax tool instead, and it interacts with three other levers: your Roth conversion, your tax bracket, and your Medicare premiums two years from now.
A CNBC Personal Finance piece from this week, "Surging yields and big bond losses may offer sizable tax savings opportunity to investors right now," makes the core point: the bond market selloff has opened a tax-loss harvesting opportunity to offset big stock gains, and you shouldn't wait until December. This post walks through what that looks like with real numbers, and where your own numbers will change the answer.
The Question: Which Account Do I Pull From, and What Do I Realize This Year?
Real retirees phrase this a few ways. "Should I sell my losing bonds now or wait?" "Can I do a Roth conversion and sell stock in the same year without a huge tax bill?" "Will this push my Medicare premiums up?"
Those are one question. Every dollar you realize this year, whether it's a capital gain, an IRA withdrawal, or a Roth conversion, lands on the same tax return. The order and mix matter more than any single move. Below is the worked example. It uses 2026 figures for a married couple filing jointly, and I've rounded where noted.
The Worked Example: $50,000 of Other Income, $80,000 Conversion, $90,000 Gain
Assumptions (this is an illustration, not your situation):
- Married filing jointly, both 63, both retired or semi-retired
- $50,000 of ordinary income (interest, part-time work, a small pension)
- Standard deduction of about $32,200 (2026 MFJ)
- Planned Roth conversion of $80,000
- Planned stock sale with $90,000 of long-term gains
- Bond fund sale would realize a $35,000 loss
Bracket space. After the standard deduction, your other income leaves taxable ordinary income of about $17,800. Add the $80,000 conversion and you reach $97,800. The 2026 MFJ 12% bracket runs to roughly $100,800, so the whole conversion sits in the 10% and 12% brackets. Ordinary tax on that is about:
- 10% on the first $24,800 = $2,480
- 12% on the next $73,000 = $8,760
- Total: about $11,240
Where the gains land. Long-term gains stack on top of ordinary income. The 0% capital gains rate applies up to roughly $98,900 of taxable income for MFJ in 2026, and you're already at $97,800. That leaves only about $1,100 of gains at 0%. The rest is taxed at 15%.
| Strategy | Net gain realized | Gains tax | Conversion tax | Total federal tax |
|---|---|---|---|---|
| A: Sell the stock, ignore the bond loss | $90,000 | $13,335 | $11,240 | $24,575 |
| B: Harvest the $35,000 bond loss first | $55,000 | $8,085 | $11,240 | $19,325 |
Harvesting the bond loss saves $5,250 of federal tax. That is your $35,000 loss times the 15% rate it displaces. The tax was already sitting in your bond fund as a paper loss, and you only had to realize it.
One caution you should not skip: a capital loss offsets capital gains first, and only $3,000 a year of any excess offsets ordinary income. It does not wipe out your Roth conversion income directly. The savings here come from shrinking the gain, not from shrinking the conversion. If you had no gains at all, the same $35,000 loss would be worth only about $360 a year at the 12% rate (a $3,000 deduction), carried forward for years.
This is the kind of analysis Lontevis runs for you, so you don't have to build the spreadsheet yourself.
The Hidden Second Saving: IRMAA
Now look at your modified adjusted gross income (MAGI), the number Medicare uses to set premium surcharges (IRMAA):
| Strategy | MAGI (ordinary + conversion + net gain) | vs. first IRMAA line (about $218,000 MFJ) |
|---|---|---|
| A: No harvest | $50,000 + $80,000 + $90,000 = $220,000 | About $2,000 over |
| B: Harvest | $50,000 + $80,000 + $55,000 = $185,000 | About $33,000 under |
The 2026 first IRMAA threshold for a couple is roughly $218,000, and the number is indexed each year, so check the figure for your year. Strategy A crosses it. At 2026 rates, that first tier adds roughly $95 a month per person across Part B and Part D, or about $2,300 a year for a couple. IRMAA is a cliff. Going $1 over costs the same as going $20,000 over.
The timing is what catches people. Medicare looks back two years. Income you report at 63 sets your premiums at 65. So this year's conversion and gain decisions show up in your first Medicare bills. Between the tax saved and the surcharge avoided, Strategy B is worth about $7,500 in this example.
If you want to see how far a conversion can go before IRMAA bites, I walk through it in Roth Conversion at 63 With a $900,000 IRA: Fill the 12% Bracket or Go to 22%? and Roth Conversion at 63: How Converting $80,000/Year From a $2M IRA Avoids IRMAA Surcharges.
Why the Roth Conversion Still Matters: RMDs
The conversion is the long game. Under SECURE 2.0, required minimum distributions start at 73 for anyone born 1951 through 1959, and at 75 for those born in 1960 or later. Assume 73 in this example.
If your $700,000 traditional balance grows at 5% for 10 years, it reaches about $1.14M. The IRS Uniform Lifetime Table divisor at 73 is 26.5, so your first RMD would be about $43,000, stacked on top of Social Security and everything else.
Now suppose you convert $80,000 a year for five years ($400,000 total). The remaining traditional balance grows to roughly $490,000 by 73 (approximate, and ignoring the timing of each conversion). Your first RMD drops to about $18,500. That's roughly $24,500 less forced income every year, which keeps you out of higher brackets and IRMAA tiers in your 70s.
For a deeper version of this trade-off, see Roth Conversion at 63 vs Waiting for RMDs at 73: How a $1.5M IRA Creates a $140,000 Avoidable Tax Bill. Your numbers will differ based on your balance, growth, and other income, so treat these as an illustration.
Three Rules That Decide Whether Harvesting Works for You
1. Wash sale rules apply to bonds too. If you sell a bond fund at a loss and buy a "substantially identical" one within 30 days before or after, the IRS disallows the loss. The usual workaround is to swap into a similar but not identical fund, such as a different index provider or a different maturity. Confirm what "not identical" means for your specific funds.
2. Harvest only real, taxable-account losses. Losses inside an IRA or 401(k) do nothing for your tax return. If your bond losses are mostly in tax-deferred accounts, this strategy doesn't apply, and that's one of the first things to check.
3. A harvested loss lowers your cost basis, so you're deferring, not erasing. You buy the replacement at today's price. If yields fall and the fund recovers, you'll owe tax on that later gain. For many retirees that's still a win. It can be a bigger win if you can hold the replacement until a lower-income year or leave it to heirs with a step-up in basis.
What the Rest of the News Cycle Means for You
The other articles in this week's coverage shape the planning environment more than the tax code does.
Rising rates cut both ways. CNBC's "Higher interest rates squeeze younger and lower-income households" notes that higher rates raise borrowing costs and savings returns, and the effects aren't evenly spread. For you as a retiree, that's the same event that created your bond loss. New bond and CD purchases now pay more, so the loss you harvest can be redeployed at a higher yield. If you're building a bridge fund, see Social Security at 62 vs 70: How a CD Ladder Bridge Fund Covers the Wait.
Don't plan around a bill that hasn't passed. CNBC reports that Rep. Haley Stevens introduced a bill in "New Social Security bill would lower retirement age to 60 for some workers" that would let some workers in physically demanding jobs claim full retirement benefits at 60. It's a proposal, not law. Your claiming decision today runs under current rules: reduced benefits at 62, full at your full retirement age, and 8% a year in delayed credits to 70. If you work a physically demanding job, this is worth watching, but I wouldn't bake it into a withdrawal plan.
Worry about Social Security and Medicare is common, and the answer is to stress-test. In "Affordability concerns loom large for advisors' clients ahead of midterm elections," CNBC reports on a survey finding that clients worry about short- and long-term costs and whether Social Security and Medicare will be there for them. The calm response is not to guess. Run your plan at your full benefit and again at a reduced one, and see whether it still works. If you'd like an example of that, see Bond Ladder vs Annuity vs Dividend Income at 64: A 20% Social Security Cut Stress Test.
Liquidity has value. NerdWallet's "I Edit Mortgage Advice for a Living — and Still Rent" describes a 54-year-old who compares the real costs of down payments, investment returns, and homeownership and chooses to rent. Whichever side you land on, the lesson for withdrawal planning is the same: money kept in a taxable account is flexible money. It's what lets you realize a $35,000 loss or fund a conversion tax bill without touching the IRA you're converting. Pay conversion taxes from taxable cash, not from the converted dollars, or the conversion loses much of its value.
Where Your Answer Will Differ From This Example
Change any one of these inputs and the right move changes:
| Your variable | What changes |
|---|---|
| Other income of $90,000 instead of $50,000 | The conversion pushes into 22%, and the 0% gains room disappears |
| No taxable gains this year | The $35,000 loss is worth about $360 a year against ordinary income |
| Single filer | The IRMAA line is about $109,000, so the same plan crosses it immediately |
| Already on Medicare at 66 | You're managing this year's income against premiums two years out |
| Large Social Security benefit | Up to 85% of it becomes taxable as your other income rises |
| Bond losses held in an IRA | No loss to harvest at all |
In the couple's case above, the "do it all" plan (Strategy A) crosses the IRMAA line, and the harvest-first plan (Strategy B) doesn't. If your gains were $60,000 instead of $90,000, you might not need to harvest anything to stay under. If your other income were $110,000, you'd be over the line even after harvesting. The plan that wins depends on where you sit relative to those cliffs.
Withdrawal order matters just as much when markets are falling. For the same tax-bracket logic applied to a market decline, see Roth Conversion at 63 in a Down Market and Roth Conversion + Capital Gains Harvesting at 65.
A Calm Checklist Before Year-End
- Sort your losses by account. Only taxable-account losses count.
- List your planned gains and conversions for the year and add them to your other income. That total is your MAGI.
- Find your nearest cliff. That's the 12% or 22% bracket edge, the 0% capital gains edge, or the next IRMAA tier.
- Harvest enough to land under it, with a replacement fund that avoids the wash sale rule.
- Pay the conversion tax from taxable cash if you can.
- Repeat next year. This is a multi-year ladder, not a one-time move.
You have until December, but the article is right that waiting until then leaves you less room to adjust.
Run Your Own Numbers
A single $35,000 bond loss changed this couple's outcome by about $7,500 once tax and IRMAA are counted. But it only worked because of their specific mix of income, gains, and conversion size. Yours will be different.
You can model your own bracket space, gains, conversion amount, IRMAA lines, and future RMDs at Lontevis, and see which combination leaves you the most after-tax income across your retirement. Doing that before you sell anything is far cheaper than fixing it afterward.
This post is educational and uses illustrative figures with 2026 tax parameters rounded where noted. It is not tax advice. Confirm current thresholds and your personal situation with a qualified tax professional.
Sources
- New Social Security bill would lower retirement age to 60 for some workers — CNBC Personal Finance
- Affordability concerns loom large for advisors' clients ahead of midterm elections, survey finds — CNBC Personal Finance
- Surging yields and big bond losses may offer sizable tax savings opportunity to investors right now — CNBC Personal Finance
- Higher interest rates squeeze younger and lower-income households. 'A rate hike is a blunt tool,' says expert — CNBC Personal Finance
- I Edit Mortgage Advice for a Living — and Still Rent — NerdWallet Retirement