We have two inherited IRAs, one withdrawn over ten years, the other over lifetime. When I run Withdrawal Priority Optimization the inherited IRAs always seem to be last in priority, while the traditional IRAs are second in priority. I'm curious why there would be a difference between the two types of IRAs given they are taxed the same. Thanks.
It doesn't look at inherited IRAs in the optimization order. It looks at taxable, your tax deferred, spouse's tax deferred, Roth and proportional withdrawals from all in each of two time periods. That takes 625 tests, but the number of tests grows factorially with the number of accounts. To add even one more account puts the number of test to nearly 15,000. Since Inherited IRAs are less well tax protected than traditional IRAs, inherited IRAs should be depleted before traditional.
