How to Maximize Your NUA Strategy with Charitable Giving and Smart Income Timing

Once you’ve decided to use Net Unrealized Appreciation (NUA) to transfer PACCAR stock out of your 401(k), you’ve already made a powerful move to reduce your tax bill. But for many retirees, that’s just the beginning.

Used thoughtfully, NUA stock can become one of the most flexible tools in your retirement plan—helping you manage taxes, support your charitable goals, and smooth out your income in a way that avoids costly surprises from Social Security and Medicare.

In this post, we’ll show you how to take your NUA strategy to the next level with smart planning techniques that work especially well in the early years of retirement.

Charitable Giving with NUA Stock

One of the most tax-efficient ways to use NUA stock is to donate it—either to a qualified charity or to a donor-advised fund (DAF). Because the stock is held in a taxable brokerage account (not in a retirement account), you can gift shares directly and potentially avoid capital gains tax entirely.

Here’s why this strategy is so powerful:

• You receive a charitable deduction for the full fair market value of the stock at the time of the donation.
• You avoid paying capital gains tax on the appreciation in the shares.
• You can fulfill large charitable commitments—or accelerate giving in a high-income year to reduce your tax bracket.

Real World Insight: The Power of Charitable Giving with NUA Stock

Sheila, married, age 64, retired from PACCAR at 61 with $450,000 in PACCAR stock inside her 401(k), fully NUA-qualified. The stock had a cost basis of $100,000. She also had $2,800/month in pension income and no immediate need to draw from her $690,000 traditional IRA.

Over three years, Sheila implemented the following strategy:

• Year 1 – Donated $75,000 worth of PACCAR stock directly to a donor-advised fund, eliminating capital gains and securing a full charitable deduction
• Year 2 –  Sold $75,000 of PACCAR stock to fund living expenses, staying within the 0% capital gains bracket
• Year 3 – Sold another $100,000, incurring minimal long-term capital gains taxed at 15% but keeping under the Medicare IRMAA threshold

She avoided paying over $22,000 in federal taxes across three years while maintaining flexibility, supporting causes she cared about, and keeping future RMDs under control.

Use NUA Proceeds to Fund the “Gap Years” Before Social Security

Many PACCAR employees plan to delay Social Security until full retirement age or later, in order to increase their benefit. But that leaves a window—often several years—between retirement and the start of benefits.

Rather than taking taxable IRA withdrawals, which can increase your ordinary income, this is the perfect time to draw on your NUA stock proceeds.

Benefits of this approach:

• You can sell stock each year to meet living expenses while staying within the 0% or 15% capital gains bracket.
• You avoid stacking additional income on top of your pension or IRA distributions.
• You preserve the ability to do Roth conversions at low tax rates, if desired.

This strategy is especially effective if your only other income is from a modest pension or part-time work, which leaves room to realize gains without jumping into a higher tax bracket.

Managing Medicare IRMAA and Social Security Taxation

While NUA can be a powerful tool for reducing taxes in early retirement, it’s important to understand how the income from NUA stock sales affects your broader retirement benefits—particularly Medicare premiums and Social Security taxation. These two systems don’t just look at how much you earn in wages or pension income. They also take into account capital gains from brokerage account sales, including proceeds from NUA stock.

Once you start drawing Social Security or enrolling in Medicare, income thresholds become more important than ever. That’s because capital gains from NUA stock can count toward:

• Provisional income, which determines how much of your Social Security benefits are taxable
• Modified Adjusted Gross Income (MAGI), which is used to calculate whether you’ll owe Medicare premium surcharges (IRMAA)

Key thresholds to watch:

• Up to 85% of your Social Security benefits may become taxable if your provisional income exceeds $44,000 for couples or $34,000 for singles (2025 data).
• For Medicare, MAGI above $212,000 (joint) or $106,000 (single) in 2025 could trigger IRMAA surcharges—increasing your monthly premiums for Parts B and D (2025 data).

Even a one-time large stock sale could cause these unintended consequences two years later, since Medicare looks back two years to calculate premiums.

Understanding Medicare IRMAA

IRMAA stands for Income-Related Monthly Adjustment Amount. It’s a surcharge added to your Medicare Part B and Part D premiums if your Modified Adjusted Gross Income (MAGI) exceeds certain thresholds.

• MAGI includes capital gains, IRA withdrawals, pension income, and even Roth conversions.
• The income Medicare uses is from two years prior to the premium year. For example, your 2025 income determines your 2027 Medicare premium.
• IRMAA is tiered, and the surcharges increase as your income rises. These surcharges apply per person, not per couple. If both spouses are on Medicare, exceeding the threshold could double the total increase in monthly premiums.

Understanding Social Security Taxation

Unlike Roth withdrawals, up to 85% of your Social Security benefits can be taxed depending on your income. The formula for determining the taxable portion is based on your Provisional Income, which includes:

• Half of your Social Security benefits
• All other taxable income (e.g., IRA withdrawals, pensions)
• Tax-exempt interest (like municipal bond income)
• Capital gains from NUA stock sales

If you sell NUA stock in the same year that you begin Social Security benefits, the gain from the sale could push your provisional income above provisional income thresholds, causing more of your benefits to be taxed.

Coordinated Strategy for PACCAR Retirees

To avoid unintended tax hits, we recommend following a sequenced approach:

1. Use sale of NUA stock to fund income needs in the first few years of retirement, before Social Security and Medicare begin.
2. Stagger stock sales across multiple years, a large stock sale in a single year could push you over an IRMAA threshold
3. Delay Social Security until full retirement age or later, preserving lower taxable income years to take advantage of 0% or 15% capital gains brackets.
4. Monitor annual MAGI carefully, staying under IRMAA tiers by spreading out large gains or pairing them with tax-deductible contributions or charitable gifts.
5. Incorporate Roth conversions during these early years to reduce future RMDs and further control income in your later retirement years.

This type of careful timing can save thousands of dollars in cumulative taxes and premiums—and protect the flexibility of your retirement plan.

Final Thoughts

NUA isn’t just about paying less tax on your company stock. It’s about gaining flexibility—the ability to draw on your assets in a way that works with, not against, your broader retirement plan. Whether you want to:

• Create a tax-efficient path to Social Security
• Avoid Medicare IRMAA surcharges
• Convert IRA assets to Roth at lower tax brackets
• Support causes you care about

In our next post, Beyond the Basics—How NA Supports Legacy, RMD Reduction, and Asset Diversification, we’ll explore how NUA fits into a legacy plan—reducing future RMDs, creating a more tax-diversified portfolio, and helping you pass wealth efficiently to the next generation.

At Allworth, we specialize in helping PACCAR employees get the most from their benefits, with retirement strategies tailored to your life, your goals, and your taxes.

NUA can help—if it’s planned correctly. Let’s get started.