inherited 401k
If a widow is beneficiary of her husbands 401k (he died before reaching 70.5) and she leaves it in his name, will RMD be based on her age or the deceased husbands age?
If a widow is beneficiary of her husbands 401k (he died before reaching 70.5) and she leaves it in his name, will RMD be based on her age or the deceased husbands age?
Permalink Submitted by Alan - IRA critic on Sat, 2016-04-09 18:40
If she is the sole designated beneficiary, her RMDs do not begin until the year her husband would have reached 70.5. For that year her RMD is based on her age as of 12/31 of that year. She may also have a choice of electing the 5 year rule, but that is seldom beneficial. Once her RMDs begin, they will be larger than her RMDs would be if she rolled the account over to her own IRA. But if she is not yet 59.5, she may want to leave it in inherited form if she needs to withdraw from it since distributions are penalty free to a beneficiary but not penalty free to an IRA owner under 59.5. Therefore, she needs to consider the age of both spouses to make the best decision. Finally, if she leaves the account in inherited form after her RMDs begin, not only will the RMDs be larger, but if she were to pass her own beneficiary (perhaps a child) would not get their own stretch and would have to continue her RMD schedule.