One other thought concerning one spouse dying earlier and leaving the surviving spouse with much higher RMD tax impacts as a single filer, would it be possible to just name the children as beneficiaries of the IRAs to avoid this?
Yes, that can be a good strategy.
Two things:
1. You want to make sure the surviving spouse has enough to live on, so there's a balancing act there.
2. The single filing status and tax rates apply to the surviving spouse regardless of their tax situation. It's worth modeling out at least a typical scenario - husband dies at 80 and wife lives to 90 or something - to see what the tax impacts might be. (I'm single so I don't think about this much, but married folk here mention it enough as an issue that I remember it because of them.)
Thanks again for the links. I haven't used CSS yet, but I've been working to understand how to treat the ACA subsidy as an additional marginal tax. It sounds like because the subsidy is based on your MAGI, and it decreases as MAGI increases, you basically consider any loss of subsidy as a tax impact and then trade that off with the tax impact of Roth conversions. I'm trying to incorporate this into my modelling spreadsheets, but I'm not sure how applicable it is to my situation with limited Roth. It seems like this consideration is a great argument for having enough Roth to cover all your planned years of ACA usage, but unfortunately it's too late for me.
Right, exactly. When your AGI goes up, generally your tax owed goes up. When your AGI goes up, your subsidy goes down. Both of these phenomena exist in parallel, and I view both as a form of tax. (One can quibble with the nomenclature; I don't care. I'm just saying if it walks like a tax and quacks like a tax, it's a tax.)
Depending on your actual numbers and ratios, a Roth conversion ladder might work. It's based on the idea that Roth conversions that are seasoned for five tax years can be withdrawn tax- and penalty-free. It's that five year delay and your spending level that probably means that it won't work very well for you. But you could look at it.
Also, I've gotten conflicting info on the ACA subsidy, but I believe it is treated a tax payment not credit. I just saw this on the i-ORP help page:"PTC is considered a payment and not a tax credit. Tax credits are limited by the taxes owed, but payments are not. The PTC amount from Form 8962 goes to line 69 of Form 1040, which is in the payments section (the same place as your W2 withholding and estimated tax payments). If the payments exceed the taxes owed, then the IRS cuts you a check (the proverbial tax refund check). I think this is an even further bonus for the early retirement folks with lots of Roth as you could not only get free health insurance, but also a check back. A further argument for more Roth.
I-ORP isn't really using very good tax language there.
Any additional PTC which you're entitled to, usually because you overestimated AGI, is a refundable credit. A refundable credit is a tax credit that is refundable to you regardless of your actual tax liability. Refundable credits work very much like tax payments such as withholding and estimated tax payments.
There can be differences between refundable credits and tax payments in some situations I guess, but in the context you're talking about, where you're just looking at your tax return and how much money you get back or have to pay, there's really not much difference.
The key point probably in this context is that it's not a use-it-or-lose-it credit. If you overestimate your income and your PTC is too small, you're guaranteed to get the rest when you file your tax return.
You're still focusing on getting money back from the IRS. I still think you may not yet get the idea that getting money back from the IRS when you're 57 and paying taxes at a 30+% rate at 75 is reducing your overall lifetime spendable wealth.