SECURE ACT
Double checking the rules: 38 year old widow wants to roll over her deceased husband’s 401(k) into an IRA – I suggest she roll it into an inherited IRA so that she can take withdrawals without the 10% penalty. She will have to take RMD’s each year. This way she can stretch the IRA and will NOT have to empty it in 10 years since she is an EDB. Do i have that right?
Permalink Submitted by Alan - IRA critic on Tue, 2021-10-05 20:25
Yes, she is an EDB assuming husband passed after 2019, but the rule not requiring her (if sole beneficiary) to take beneficiary RMDs until husband would have reached RMD age still applies. If husband was born after 6/30/1949, his RMD age would have been 72, so she would not have to take any beneficiary RMDs until the year he would have reached 72. Perhaps she will be 59.5 before that year and can elect ownership of the inherited IRA at that time.
This rule also applies if she keeps the inherited 401k in place. But if she wants to do a direct rollover to an IRA, she needs to be sure to open an inherited IRA to receive the direct rollover. That way, she can take distributions as needed without penalty. The 401k might not allow her to take discretionery distributions anytime she wishes, and in that case a direct rollover to an inherited IRA is recommended.
Permalink Submitted by Thomas G. Blair on Tue, 2021-10-05 21:08
THANK YOU SO MUCH!!!! 🙂