When you pass away, the fate of your 401(k) depends on several factors. If you designate a beneficiary, that person will typically inherit the account. If there’s no beneficiary, the funds may go to your spouse, children, or estate, depending on your plan’s rules and state laws. If you’re over 59½ at your death, the beneficiary can withdraw funds without penalty. However, if you’re younger, they’ll generally face a 10% penalty on withdrawals before age 59½. Required minimum distributions (RMDs) may also apply to inherited 401(k)s. These distributions ensure that the account is gradually withdrawn over time. Beneficiaries may be able to roll the funds into their own IRA or 401(k) to avoid taxes and penalties. Understanding these rules can help you plan for the distribution of your 401(k) and ensure your loved ones receive the maximum benefit from your retirement savings.
What Happens to My 401k When I Die