Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
401k when a spouse dies
Old 11-11-2017, 12:29 PM   #1
Recycles dryer sheets
TrophyWife's Avatar
 
Join Date: Feb 2016
Posts: 109
401k when a spouse dies

It's my understanding that it's best to rollover a 401k to a personal ira when a spouse dies. And if that spouse was 10 years older than you, skip the inherited ira.

Can anyone confirm this?
__________________

__________________
TrophyWife is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-11-2017, 12:37 PM   #2
Thinks s/he gets paid by the post
38Chevy454's Avatar
 
Join Date: Sep 2013
Location: Cincinnati, OH
Posts: 1,561
It will always be an inherited 401k as to the source of the funds. You can change the date to your 10 year earlier birthday for RMD purposes, but the RMD needs to start when the original person would have turned 70.5, your lower age makes the factor less however. I don't see any reason why changing to a personal IRA would be of any value. It may cause troubles with the RMD rules. Someone better knowledge can confirm the issues with change from inherited 401k to personal IRA.

I assume you are listed as the beneficiary of this inherited 401k?
__________________

__________________
After Monday & Tuesday even the calendar says, W-T-F...

Semi-Retired 7/1/16: working part-time (60%) for now [4/24/16 changed to 80%]
Retired Aug 2, 2017; age 53
38Chevy454 is offline   Reply With Quote
Old 11-11-2017, 01:11 PM   #3
Recycles dryer sheets
 
Join Date: Aug 2013
Posts: 185
The Slott Report covers this and similar topics on a regular basis https://www.irahelp.com/slottreport
__________________
Al18 is offline   Reply With Quote
Old 11-11-2017, 01:15 PM   #4
Moderator
rodi's Avatar
 
Join Date: Apr 2012
Location: San Diego
Posts: 8,739
I'm not sure what you mean by skipping the inherited IRA part if the spouse is 10 years younger... Are you talking about cashing it out - paying taxes on the full amount?

There are two ways to handle the inherited IRA for a spouse - life expectancy - where RMDs must start by the time the original (deceased) owner would have turned 70.5 yo. The life expectancy calculations are based on the recipients age, however. Or you can do a 5 year withdrawal - this avoids the RMDs - but the full value has to be taken out over 5 years. This is only allowed if the original owner was under 70.5 and hadn't started RMDs.

Vanguard has a decent explanation.
https://investor.vanguard.com/inherit/ira-rmd

I have a beneficiary IRA that I inherited from my father. He was already taking RMDs so I take RMDs - but they are based on my age/life expectancy.
I use the Schwab beneficiary RMD calculator to figure out my RMD amount.
Beneficiary RMD Calculator | Charles Schwab
__________________
Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 7%, rental income 18%
rodi is offline   Reply With Quote
Old 11-11-2017, 01:15 PM   #5
Thinks s/he gets paid by the post
Sunset's Avatar
 
Join Date: Jul 2014
Location: Chicago
Posts: 4,596
Not clear on what you mean by skip the inherited IRA. Surely you don't mean refuse it ?
__________________
Sunset is offline   Reply With Quote
Old 11-11-2017, 01:17 PM   #6
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Location: Florence, AL/Helen, GA
Posts: 2,052
And we know to be very careful with RMDs, as they come with a 50% penalty.

Everyone needs to make sure the names on hour beneficiaries are right--and also add secondary beneficiaries.
__________________
Bamaman is offline   Reply With Quote
Old 11-11-2017, 01:51 PM   #7
Thinks s/he gets paid by the post
ivinsfan's Avatar
 
Join Date: Feb 2007
Posts: 2,182
Is this question for your recently widowed friend? If it is, it's not the type of question where you take a strangers advice on the internet. Especially when it ends up going thru 3 people, the poster, you, your friend.
My advice is be there for her but refer all types of questions like this to a professional...on the ACA thread you're asking people to pick her a health insurance plan..go with the pros in most cases it's even free.
__________________
ivinsfan is offline   Reply With Quote
Old 11-11-2017, 02:06 PM   #8
Thinks s/he gets paid by the post
growing_older's Avatar
 
Join Date: Jun 2007
Posts: 2,600
You need actual legal advice here. I think a spouse can inherit an IRA and unlike any other heir can transfer the contents to her own IRA, not leave as an inherited IRA as required by any other heir. Whether a 401k can receive similar treatment or needs to be converted to an IRA first is unclear. Is this even allowed? Plus these rules have been changing, so we need CURRENT actual legal advice from someone knowledgeable,

I have found several financial advisers who confidently told me procedures and rules that they were very familiar with and had used, but which were incorrect and all their clients made irrevocable mistake transactions and cost themselves dearly. Check and Double Check. These rules are poorly understood, even by professionals who should know better.
__________________
growing_older is offline   Reply With Quote
Old 11-11-2017, 05:42 PM   #9
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,609
I dealt with much of this when my dad died, and then again when my mom died. But by the time my dad died, it was already all in an IRA, after rolling over the 401K he had upon his retirement.

I am not a lawyer, but in the case of my dad's passing, my mom simply inherited his IRA as her own, no tax issues involved. When my mom passed, that IRA was broken into four equal pieces for her kids, and while we could inherit the IRA, since she was already over 70 1/2 and taking RMDs from it we also have to take RMDs from our portion of the inherited IRA based on our own life expectancy.

But in reality, a spouse should be able to inherit a 401K like an IRA. Whether they should roll it over into an IRA is a similar decision as to whether someone should roll over their own 401K into an IRA. There are considerations including flexibility in terms of withdrawals and asset protection. (A 401K is a pension plan by law, so it is protected by federal pension laws whereas an IRA's protection varies by state.)
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 11-11-2017, 05:51 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 2,903
Quote:
Originally Posted by ziggy29 View Post
.................... When my mom passed, that IRA was broken into four equal pieces for her kids, and while we could inherit the IRA, since she was already over 70 1/2 and taking RMDs from it we also have to take RMDs from our portion of the inherited IRA based on our own life expectancy.

...............................................)
Wondering what would have happened if your mom had not been taking RMDs yet? Wouldn't you still have to take RMDs based on your own life expectancy?
__________________
kaneohe is offline   Reply With Quote
Old 11-11-2017, 06:55 PM   #11
Thinks s/he gets paid by the post
 
Join Date: May 2014
Posts: 2,924
Quote:
Originally Posted by kaneohe View Post
Wondering what would have happened if your mom had not been taking RMDs yet? Wouldn't you still have to take RMDs based on your own life expectancy?
I think that if it's not the spouse who inherits, it all needs to be taken out over a 5-year period, with appropriate taxes.

I went through this with DH- an IRA, not a 401(k) and as others have noted this may make a difference. DH was taking RMDs out of it since he was over 70. He named his son (my stepson) beneficiary. In DH's last months we discussed this with DSS and it was clear DSS wanted to liquidate it all ASAP. DH changed the beneficiary to me, I merged it into my own IRA when DH died, with no RMDs till I turn 70 in 2023. I just wrote DSS a check from my after-tax accounts after first taking out the RMD for 2016, the year DH died.
__________________
athena53 is offline   Reply With Quote
Old 11-13-2017, 11:26 AM   #12
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 2,903
Quote:
Originally Posted by athena53 View Post
I think that if it's not the spouse who inherits, it all needs to be taken out over a 5-year period, with appropriate taxes.

............................................
seems like you could also do the life expectancy thing based on beneficiary's age https://www.irs.gov/retirement-plans...-beneficiaries
__________________

__________________
kaneohe is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Guidance on Inheriting Spouse's 401k (and other issues) googily FIRE and Money 12 03-30-2017 08:18 AM
Please advise: steps to take when a spouse dies suddenly. aida2003 Other topics 10 01-18-2015 03:50 PM
One Spouse Works...One Spouse ER PERSonalTime Life after FIRE 40 03-18-2014 08:41 PM
Losing part of your social security when a spouse dies modhatter FIRE and Money 30 05-22-2011 07:17 AM
Put more into 401k, fund Roth for spouse, or pay down piggyback mortgage?? CompoundInterestFan FIRE and Money 23 09-11-2007 11:26 PM

 

 
All times are GMT -6. The time now is 01:54 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.