Retirement Weekly: I inherited money from my father. How do I avoid a ‘tax bomb’ with RMDs?

Dear Dan, I’m one of the many baby boomers who are inheriting some accounts from our parents after they pass. I inherited a taxable account, so the step-up in cost basis wiped out the tax liability back to the date of my father’s passing a year ago. 

My wife and I are 58, and recently retired, so I’m also doing Roth conversions of about $100​,000 a year​, staying inside the 12% bracket​, to keep our future ​required minimum distributions from becoming a tax bomb on​ us. How do I best balance Roth conversions and tax gain harvesting over the long term?   – SL Hi SL,  I’m sorry to hear of your dad’s passing. My condolences to you and your family. Exercising Roth conversions in your situation can be a sound tax strategy because tax rates applicable to your household are probably going to be higher in the future, but we’re talking about taxes so it’s rarely that straightforward. The conversions create an additional attractive source of future tax-free funds and reduce future taxation on the IRA—the tax bomb you are trying to avoid. I’ll assume you are converting traditional IRA funds to a Roth IRA, …

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