I am set to RE very, very soon and pretty much know how to manage my drawdowns at this point, but wanted to see if anyone had any insights on the wild card that is a substantial inherited IRA (it was a pretty nice size when I received it, but have grown it quite a bit since I inherited).
I am taking the MRDs already, having taxes withheld at 20% so as to ensure I don't get a surprise at tax time. So far the MRDs are small enough to not really hurt my overall withdrawal plan or incur any issues tax-wise, but it's grown so much that I'm having to take thousands more each year, and will keep growing, and I just found out I'm not allowed to do a Roth conversion out of an inherited IRA (which was my first inclination, darn it).
I can take out more than the MRD penalty free as long as I pay taxes on the amounts. I thought about just using this as my main source of living expenses the first 10 years (instead of tapping the taxable's cap gains/dividends), but it will mean paying out about 7% average to taxes (while still staying in the 15% taxable bracket). And I'd like to minimize the tax payouts as much as possible - if it wasn't for that account and the potential growth, I'd be able to pay no taxes ever again (via GoCurryCracker's method).
Basically, I have about 12 years' living expenses (LE) in a taxable account, about 10 years of LE in the inherited IRA and roughly 5-8 more years LE in my 401k, Roths and cash. Since I can't do conversions on the inherited account, I'm concerned that the only option I have to stop the ever-growing MRDs is to take out more, and pay more taxes to move it to taxable/fund Roths (if I have earned income - which I may not after this year).
And yes, I realize that this is a great problem to have in the grand scheme of things.