Taxes, Inherited IRA, move to Traditional?

[silvor]

Lets say I was making 115k and I was putting 41k in my 401k Roth and Roth IRAs.

Now I have an Inherited IRA of 500k, and because of the whole 10 year rule I want to minimize my taxes. So if I simply put the 41k into Traditional IRAs and 401ks, my tax bill for 2022 will be the same right?

Seems like a stupid question, but I swear I was told I can actually pull out more from the Inherited IRA and have the same tax bill.

Any help is appreciated.

 

[CardsFan]

I am no tax expert, but it seems straight forward.

I assume you are still working (since you contribute to the Roths). So, yes, if you change the Roth contributions to tIRA/401k, you could take the same amount of money from the inherited tIRA and not change your taxes.

This makes sense to me. Basically you are trading the 10 year timeline for the inherited tIRA, for your (probably) longer timeline with your own tIRA.

 

[SecondCor521]

Yes. The deductible traditional and 401(k) contributions will reduce your AGI, and the distributions from the inherited IRA will increase your AGI.

Note two things:

1. A variety of factors might limit your ability to contribute and deduct $41K, including for example not filing MFJ, being an HCE, having an income that is too high, and perhaps some other things. For a single person, for example, the 401(k) max is about $20K and the IRA contribution max is about $6K if you're under 50.

2. With a $500K inherited IRA, if the account grows over the 10/11 year period, you'll have to take out more than $41K. If the account grows at 10% yearly, you'd have to take out in the neighborhood of $75K to empty it within the necessary time frame.

 

[gauss]

This may go without saying, but be sure to avoid any type of rollover with the Inherited IRA RMD distributions.

They are not eligible for rollover.

-gauss