I have a traditional IRA account with nothing in it because I just opened it this year. I also have a Roth IRA (with a little in it because I opened it a few years back). My wife, who I file with jointly, has the same setup.
We are no longer eligible to contribute to the Roth. So, I would like to contribute to our traditional IRAs and convert to the Roths.
But, just two years ago, I received an inherited IRA with about 200K in it. From what I am reading, this has a major impact on my Roth conversion, and likely makes it not worth it. I just want to make sure that I understand that correctly. Is the problem that, after doing the conversion, almost the entire contribution will be taxable… when I take it out years from now? That’s what I don’t get. When is this taxing taking place? I have already paid taxes on the contribution, do I pay again when it gets converted?
Lastly, if the inherited IRA negates the reason for converting my contribution to a Roth, would it cause the same problem for my wife? I was the beneficiary on the inherited IRA. Would this account figure into the equation for my wife’s IRAs and the ability to roll over contributions between her accounts?