He’s 70 and Wants to Move $1 Million Out of a Traditional IRA Without Costing His Wife Her Subsidy. Two Birthdays Decide How

A 70 year old, retired reader recently emailed us with some questions. He holds just over $1 million in a traditional IRA. His wife is 58, still working, and covered through an ACA marketplace plan. They report combined gross income of about $65,000. She pays $500 a month toward her coverage, and a $700 monthly subsidy covers the rest. He want to move money into a Roth and into cash, and believes any conversion big enough to matter pushes you over the subsidy cliff.

He’s right to worry. The cliff is real, and in 2026 it got sharper. Couples with one retired spouse and a younger one on the Marketplace routinely hit this same wall. Two birthdays change it from an impossible problem into a scheduling problem.

Why One Dollar Over the Line Costs Her the Whole Year

Premium tax credits end once household income passes 400% of the federal poverty line. The enhanced subsidies that cushioned that edge ended on Dec. 31, 2025. Every dollar you convert counts toward that test.

2026 also brings a trap you haven’t mentioned. Under the current statute, your tax rises by the full amount of the excess. That occurs if advance payments exceed the credit you actually qualify for. The old repayment caps are gone. Exceed by a small amount and you repay the entire year’s advance subsidy when you file. At your reported rate, that’s about $8,400.

Guessing gets expensive under that rule. Convert late in the year, once wages, interest and dividends are known, and never convert in January on a hopeful estimate. Roth conversions can’t be reversed, so timing within the year matters.

Birthday One: Your 73rd Ends Your Control Over Income

You wrote that you’re nearing RMD age. Under current law, required distributions start at 73 for you. That leaves three more tax years, including what’s left of 2026, when your taxable income is almost entirely your choice.

That control is the asset you didn’t know you had. Once RMDs begin, about $37,000 a year by your own estimate lands on your return whether you want it or not. Add that to your current income and you’re near $102,000. Compare that total with 400% of the poverty line for a household of two, and if it comes out higher, the subsidy goes away at 73 no matter what you do. That makes the next three years the only ones worth defending it in.

Birthday Two: Her 65th Erases the Cliff

Most people are eligible for Medicare when they reach the age of 65. Your wife gets there in seven years, when you’ll be 77. Once she’s on Medicare, the subsidy question is over for her. From then on, tax brackets and Medicare’s income-based premium surcharges are the only limits on your conversions.

The cliff has an expiration date. Your job is to arrange your conversions around it.

Two Ways to Convert Between Now and 73

Path 1: Stay under the ceiling every year. Work out your own margin. Take 400% of the current poverty guideline for two, subtract your projected income, and leave a buffer. You keep the subsidy, and your conversions are likely taxed at 12%. For joint filers in 2026, that bracket runs to $100,800 of taxable income, after a $32,200 standard deduction. The weakness is that your margin is probably modest, and small annual conversions barely reduce a $1 million balance.

Path 2: Go over the cliff once, on purpose. The lost subsidy is a fixed cost. Giving up $8,400 to convert a few thousand extra dollars is a terrible trade. Spread over a $150,000 conversion, it works out to about a 6% surcharge. If you cross the line, cross it by a lot. The 22% bracket runs to $211,400 of taxable income. Tell the Marketplace ahead of time so the advance payments stop and you don’t face a lump-sum repayment at filing.

With $1 million in the IRA and RMDs on the way, Path 2 does most of the heavy lifting. Use Path 1 in the other years.

Two Levers You Haven’t Pulled

You’re already past 70½, so qualified charitable distributions are open to you. They send IRA money straight to charity without counting it as income, and after 73, they can also cover your RMDs while keeping you under the ceiling. They only help if you already give. Giving away a dollar to save a fraction of a dollar in tax leaves you behind.

Ask about her employer’s health plan. Suppose her job offers coverage that meets minimum value. It costs her less than the affordability threshold, which the statute sets at 9.5% of household income, indexed each year. In that case she generally can’t get the credit at all. Either the subsidy you’re protecting is already at risk of repayment, or cheaper coverage is going unused.

What to Do Before December 31

First, get her employer’s coverage terms in writing this week. Everything else depends on the answer. In December, count your 2026 income to date, calculate 400% of the poverty guideline for two, and convert up to a buffer below it. Then plan 2027 or 2028 as your one deliberate cliff year and fill the 22% bracket. Avoid converting just a little over the line. Under 2026 rules, that’s the most expensive conversion you can make.

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