Let's say my wife (early 30's) has a bit of money in an inherited IRA from her father. Because it's an "inherited" account, she can draw from it without paying penalties, but it is not a Roth so she will have to pay normal income tax on any withdrawals. She also cannot make any further contributions to the account.
Now, we are rather low earners. Around $60k/yr together so we don't even fill the 12% tax bracket. I was considering pros and cons to slowly moving some of this account into a brokerage account, or a Roth IRA if possible. Looking at the long term capital gains tax brackets, it's unlikely we would pay much, if any, tax on withdrawals from the brokerage account during retirement since the the 0% long term capital gains tax bracket reaches nearly $100k when filling joint.
If we did this, we would pay taxes now on whatever we move so there's less money to grow, but less taxes paid later (leaving us with slightly more money according to some quick estimated calculations). However, if we decided for any reason to change up allocations, there would be tax implications at that time. We keep most of our portfolio in the S&P 500 and have no plans to change that anytime soon, but it's worth considering.
If we leave it as is and just let it grow, we pay nothing now, but full income tax rates in retirement. It also allows us to buy and sell within the account, if we decided to do so, without tax implications.
I would love to hear everyone's thoughts on this. I find it to be an interesting situation.