What to Do With Your Spouse's 401k After Death
Losing your spouse is devastating. Here's how to handle their retirement account.
Key Takeaways
- 1As a surviving spouse, you have more options than other beneficiaries.
- 2You can roll it into your own IRA (spousal rollover) - most common choice.
- 3You can keep it as an inherited IRA and take distributions based on your age.
- 4You can cash it out, but you'll owe income tax (and possibly penalty if under 59½).
- 5There's no rush - take time to grieve before making financial decisions.
- 6The 10-year rule does NOT apply to surviving spouses.
Your Options as Surviving Spouse
Surviving spouses have the most flexibility of any beneficiary:
| Option | Best For | RMD Rules |
|---|---|---|
| Spousal rollover to your IRA | If you're under 59½ and don't need funds | Your age-based RMDs |
| Keep as inherited 401k | If you need access before 59½ | Spouse's age-based or yours |
| Keep in spouse's 401k | Temporary while deciding | Depends on plan |
| Cash out | If you need funds immediately | N/A - all taxable now |
Spousal Rollover (Most Common)
Roll the 401k into your own Traditional IRA or Roth IRA:
- **Treat it as your own:** Follows your RMD schedule, not theirs
- **No 10-year rule:** You're exempt as surviving spouse
- **Roth option:** Can roll to Roth (pay taxes now, tax-free later)
- **Caution if under 59½:** Early withdrawals from your IRA face 10% penalty
Keep as Inherited 401k/IRA
This option preserves access flexibility:
- **No 10% penalty:** Withdrawals aren't subject to early withdrawal penalty
- **Useful if under 59½:** Access funds without penalty while grieving/adjusting
- **Can convert to spousal rollover later:** Switch when you turn 59½
- **RMD flexibility:** Use spouse's age or yours, depending on situation
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Cashing Out
Taking a lump-sum distribution:
- **Fully taxable:** Entire amount is ordinary income
- **Potential bracket spike:** Large amount may push you into higher brackets
- **No 10% penalty:** Death distribution exempts from early withdrawal penalty
- **Generally not recommended:** Loses tax-deferred growth forever
There's No Rush
Important: You don't need to decide immediately.
- Leave the account where it is while you grieve
- Most 401k plans allow surviving spouses to delay decisions
- Consult a financial advisor before acting
- Avoid salespeople who pressure immediate decisions
- The money will be there when you're ready
Beware of Vultures
Unfortunately, some financial salespeople target grieving widows/widowers. Don't make major financial decisions while in acute grief. Anyone pressuring you to act immediately does not have your best interest at heart.
Consider Protection for Your Combined Retirement
After consolidating accounts, consider diversifying into physical gold.
- Roll spouse's 401k + yours into single Gold IRA
- Physical gold provides stability during difficult times
- Protect your combined retirement from market volatility
- Simplify management with one protected account
- No stock market dependence for your security
Frequently Asked Questions
1Do I have to take RMDs from my deceased spouse's 401k?
It depends on the option you choose and your/their ages. If you do a spousal rollover, RMDs follow your age. If you keep it as inherited, rules vary. If your spouse was already taking RMDs, their year-of-death RMD must be taken.
2What if my spouse had both a 401k and an IRA?
You'll handle each account separately, but the same options apply to both. You can roll both into your own IRA if that makes sense for simplification.
3What about Roth 401k - different rules?
For inherited Roth 401k, surviving spouses still have the spousal rollover option. The key difference: Roth distributions are tax-free (assuming 5-year rule met). A spousal rollover to your Roth IRA continues tax-free growth.
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