What Is an Inherited 401(k)?

Research. Education. Perspective.

An inherited 401(k) is a beneficiary's interest in a workplace retirement plan after the participant dies.

It is not automatically one standardized account with one standardized payout rule.

What happens next depends on several facts:

• who the beneficiary is
• whether the beneficiary is the participant's spouse
• whether the beneficiary is an individual
• whether the beneficiary qualifies as an eligible designated beneficiary
• whether the participant had reached the applicable required beginning date
• whether the account contains traditional, Roth or after-tax money
• what distribution options the employer's plan actually offers

The post-death rules changed materially under the SECURE Act and SECURE 2.0.

For many beneficiaries, the most important federal rule is now the:

10-year rule

but even that rule is more complicated than simply:

"Empty the account sometime within 10 years."

If the participant died after required minimum distributions had begun, annual beneficiary RMDs can also apply during the 10-year period.

Key Takeaways

• A 401(k) beneficiary's legal rights begin with the plan document and beneficiary designation.
• A surviving spouse generally has broader rollover options than a nonspouse beneficiary.^[3][4]
• A nonspouse designated beneficiary can generally move an eligible inherited-plan amount to an inherited IRA only through a direct trustee-to-trustee rollover.^[3][4]
• A nonspouse beneficiary generally cannot receive the money personally and then complete an ordinary 60-day rollover.^[4]
• Most designated beneficiaries who are not eligible designated beneficiaries are subject to the 10-year rule.^[1][2][7]
• Under the 10-year rule, the entire account generally must be distributed by the end of the tenth calendar year following the participant's death.^[1][2]
• If the participant died after the required beginning date, annual RMDs generally continue during the 10-year period under the final regulations.^[3][7]
• If the participant died before the required beginning date and the beneficiary is subject to the pure 10-year rule, federal law generally does not require a fixed annual distribution in years 1 through 9, although the plan can impose its own distribution structure.^[7]
• Eligible designated beneficiaries include a surviving spouse, the participant's minor child, a disabled individual, a chronically ill individual, and an individual not more than 10 years younger than the participant.^[2][7]
• A participant's minor child generally stops receiving the special child treatment at age 21, after which the 10-year rule begins.^[2]
• Death distributions are generally exempt from the 10% additional early-distribution tax.^[5][9]
• Beneficiaries of designated Roth 401(k) accounts are subject to post-death RMD rules even though the original owner is not required to take lifetime RMDs from the Roth account.^[1][2]

Inherited 401(k) in One Sentence

> ROIStreet Definition > > An inherited 401(k) is the remaining interest in a deceased participant's employer retirement plan that passes to a beneficiary and becomes subject to beneficiary-specific tax, rollover and required-distribution rules.

The beneficiary does not simply step into the employee's shoes in every respect.

Different beneficiaries receive different rights.

The Plan Comes First

Federal tax law sets rules for:

• rollovers
• required minimum distributions
• taxable income
• additional taxes

But the plan document determines which forms of distribution the plan offers.

A plan may provide beneficiary choices such as:

• lump-sum distribution
• installment payments
• continued account in the plan
• direct rollover

Another plan may require a faster payout.

The tax code can allow an option without requiring every plan to offer that option.

That distinction matters immediately after a participant dies.

The Beneficiary Designation Usually Matters More Than the Will

A 401(k) is a contractual retirement-plan benefit.

The plan administrator generally follows the plan's beneficiary records and applicable federal spousal rules.

A participant's will does not automatically rewrite the beneficiary designation maintained by the plan.

This is why beneficiary forms should be reviewed separately from:

• wills
• trusts
• powers of attorney
• general estate-planning documents

The documents should coordinate.

They do not automatically substitute for one another.

Spousal Rights Can Be Special

Many qualified retirement plans provide significant spousal protections.

Depending on the plan structure and applicable law, a married participant may need spousal consent to name someone else as beneficiary or elect certain forms of benefit.

A surviving spouse can therefore have rights that differ from:

• an adult child
• sibling
• unmarried partner
• trust
• estate
• charity

Tax law also gives the surviving spouse broader rollover choices.

The Four Beneficiary Categories

A useful way to analyze an inherited 401(k) is to begin with four categories.

1. Surviving spouse

The spouse is an eligible designated beneficiary and has special rollover and RMD choices.

2. Other eligible designated beneficiary

An individual who qualifies under one of the special federal categories.

3. Designated beneficiary who is not an eligible designated beneficiary

Usually an individual such as an adult child who does not fit a special category.

This beneficiary is generally subject to the 10-year rule.

4. Non-designated beneficiary

Examples can include:

• an estate
• charity
• some trusts that do not qualify for look-through treatment

These beneficiaries can face a separate 5-year or remaining-life-expectancy framework depending on when the participant died.

What Is a Designated Beneficiary?

A designated beneficiary is generally an individual designated under the retirement-plan beneficiary rules.

The distinction is important because the SECURE Act 10-year framework primarily focuses on:

• designated beneficiaries
• eligible designated beneficiaries

A beneficiary that is not an individual can face different rules.

What Is an Eligible Designated Beneficiary?

Current federal law identifies five principal categories.^[2][7]

An eligible designated beneficiary can be:

1. the participant's surviving spouse
2. the participant's minor child
3. a disabled individual
4. a chronically ill individual
5. an individual not more than 10 years younger than the participant

This status can permit distributions over life expectancy in circumstances where an ordinary designated beneficiary is subject to the 10-year rule.

A Minor Child Means the Participant's Child

The special minor-child category applies to a child of the deceased participant.

It should not be generalized to every minor beneficiary.

For this federal retirement-rule purpose, the age-of-majority transition generally occurs at:

age 21.^[2]

After that transition, the remaining inherited balance generally becomes subject to a 10-year distribution period.

What Is the 10-Year Rule?

For most designated beneficiaries who are not eligible designated beneficiaries, the SECURE Act requires the inherited defined contribution account to be fully distributed within:

10 years

after the participant's death.^[1][2][7]

More precisely, the deadline is generally the end of the calendar year containing the tenth anniversary of death.

Example

Participant dies in:

2026

The tenth calendar year after death is:

2036

The applicable inherited balance generally must be fully distributed by:

December 31, 2036

subject to the beneficiary classification and other rules.

The 10-Year Rule Does Not Always Mean “Wait Until Year 10”

This has been one of the most misunderstood post-SECURE Act rules.

The annual-distribution requirement depends materially on whether the participant died:

• before the required beginning date, or
• after the required beginning date

The final RMD regulations apply for distribution calendar years beginning on or after January 1, 2025.^[7]

Participant Dies Before the Required Beginning Date

Assume:

• participant dies before the required beginning date
• adult child is the designated beneficiary
• child is not an eligible designated beneficiary

The 10-year rule generally applies.

Under this version of the rule, the beneficiary generally can choose the timing of distributions within the 10-year period as long as the entire account is distributed by the deadline, subject to the plan's terms.

Conceptually:

That does not mean waiting until year 10 is necessarily tax-efficient.

It means the federal 10-year rule itself can allow flexibility.

Participant Dies After the Required Beginning Date

Now assume:

• participant had already reached the required beginning date
• adult child is the beneficiary
• child is not an eligible designated beneficiary

Two federal concepts operate together:

1. the account must continue to satisfy the annual minimum-distribution framework, and
2. the entire account must still be emptied by the end of year 10.^[3][7]

This creates:

annual RMDs + 10-year full-distribution deadline

rather than a simple year-10-only rule.

Why the Required Beginning Date Matters

The required beginning date is the federal point at which the original participant is treated as having entered the mandatory-distribution regime.

For many 401(k) participants, the required beginning date is generally April 1 following the later of:

• the calendar year the participant reaches the applicable RMD age, or
• the calendar year the participant retires

if the plan allows the working exception and the participant is not subject to a special ownership rule.^[1][3]

The participant's exact facts and plan terms matter.

Death-Year RMD

If the participant dies after an RMD was required for the year and had not yet taken the full amount, the beneficiary generally must ensure the remaining death-year RMD is distributed.^[1]

That distribution is separate from the beneficiary's later-year distribution schedule.

Example

Participant's 2026 RMD:

$20,000

Participant took before death:

$8,000

Remaining death-year amount:

$12,000

The beneficiary generally must arrange for the remaining $12,000 to be distributed under the applicable rules.

Surviving Spouse Options

A surviving spouse has the broadest beneficiary flexibility.

Depending on the plan and transaction, the spouse may be able to:

• remain a beneficiary under the employer plan
• take a distribution
• complete a rollover to an inherited IRA
• roll eligible amounts to an IRA treated as the spouse's own
• roll eligible amounts to another employer retirement plan that accepts the rollover^[3][4]

These options can produce different results for:

• RMD timing
• early-distribution tax
• beneficiary control
• future beneficiaries

Own IRA vs. Inherited IRA for a Surviving Spouse

This is one of the most consequential spouse decisions.

Own IRA treatment

The surviving spouse becomes the IRA owner.

Advantages can include:

• ordinary owner contribution rules where otherwise eligible
• ordinary owner RMD timing
• ability to name new beneficiaries under owner rules
• consolidation with other IRA assets

But early-distribution treatment changes.

Inherited IRA treatment

The account retains beneficiary status.

That can preserve the death-distribution exception to the 10% additional tax for withdrawals made before the spouse reaches age 59½.^[9]

This can be especially relevant to a younger surviving spouse.

Example: Surviving Spouse Age 52

Assume:

• deceased participant leaves a pre-tax 401(k)
• surviving spouse is age 52
• spouse may need withdrawals before age 59½

If rolled to an IRA treated as the spouse's own

Later early withdrawals generally follow the spouse's normal IRA early-distribution rules.

The death exception generally no longer applies merely because the funds originally came from the deceased spouse.

If preserved as an inherited account

Distributions attributable to the participant's death generally are not subject to the 10% additional tax.^[9]

Ordinary income tax can still apply to pre-tax distributions.

This can make inherited status useful temporarily for some younger spouses.

Surviving Spouse RMD Timing

Surviving-spouse RMD rules contain special provisions.

SECURE 2.0 expanded spouse treatment, including rules allowing a surviving spouse in certain circumstances to be treated as the deceased employee for RMD calculations.^[6]

The spouse can therefore have choices that differ materially from the ordinary nonspouse 10-year rule.

Because spouse treatment depends on:

• whether the participant died before or after the required beginning date
• whether the spouse is sole beneficiary
• whether the spouse keeps beneficiary status
• whether the spouse rolls to an own IRA
• plan terms

a spouse should not use a generic nonspouse inherited-IRA calculator without confirming the account structure.

Nonspouse Beneficiary Rollover

A nonspouse designated beneficiary can potentially move eligible retirement-plan money to an:

inherited IRA

through a direct rollover.^[3][4]

The receiving IRA must preserve the inherited character.

It is not an ordinary IRA owned by the beneficiary.

Direct Means Direct

For a nonspouse beneficiary, the direct-rollover rule is critical.

The eligible amount generally must move:

plan trustee → inherited IRA custodian

The beneficiary generally cannot:

1. receive a distribution personally
2. deposit it into a bank account
3. place it into an inherited IRA within 60 days

and treat that as a valid nonspouse rollover.

IRS guidance specifically limits the nonspouse rollover to the direct rollover structure.^[4]

The Inherited IRA Must Identify the Decedent

An inherited IRA should be titled in a manner that preserves the deceased participant and beneficiary relationship.

The exact custodian titling convention varies, but the account should clearly identify:

• the deceased person
• the beneficiary
• the inherited nature of the account

It should not simply look like an ordinary contributory IRA owned outright by a nonspouse beneficiary.

A Nonspouse Beneficiary Cannot Treat It as Their Own IRA

A nonspouse beneficiary generally cannot:

• combine the inherited IRA with the beneficiary's own IRA
• make regular contributions to it
• convert it into a personal IRA by election
• use an ordinary 60-day rollover to move inherited distributions

The inherited account remains tied to the deceased owner's beneficiary rules.

Why a Direct Rollover Can Be Useful

A direct rollover to an inherited IRA can provide:

• continued tax deferral on pre-tax inherited assets
• broader investment choice than some employer plans
• custodian control
• potentially more flexible distribution administration

But it does not erase:

• the 10-year rule
• annual RMD requirements where applicable
• beneficiary deadlines

The inherited IRA carries the post-death distribution framework with it.

A Direct Rollover Does Not Restart the 10-Year Clock

Suppose:

• participant dies in 2026
• adult child inherits the 401(k)
• direct rollover to inherited IRA occurs in 2028

The 10-year clock generally still traces back to:

the participant's 2026 death

It does not restart in 2028 because the custodian changed.

This is one reason beneficiaries should preserve the participant's date-of-death records.

Eligible Designated Beneficiary Life-Expectancy Treatment

An eligible designated beneficiary can often use a life-expectancy distribution framework rather than the ordinary 10-year rule.^[2][7]

Potential categories include:

• surviving spouse
• qualifying minor child
• disabled beneficiary
• chronically ill beneficiary
• beneficiary not more than 10 years younger than participant

The calculation generally uses the beneficiary's life expectancy under the applicable IRS table and rules.

Special rules apply when the participant died after the required beginning date.

Minor Child Example

Assume:

• participant dies
• sole beneficiary is participant's 15-year-old child
• child qualifies as an eligible designated beneficiary

The child can generally use the special life-expectancy treatment while the child remains a qualifying minor.

At:

age 21

the child generally ceases to be an eligible designated beneficiary for this purpose.^[2]

The remaining balance then generally becomes subject to a new:

10-year distribution period

beginning under the statutory transition rules.

Disabled and Chronically Ill Beneficiaries

Federal law provides special eligible-designated-beneficiary treatment for individuals who meet statutory disabled or chronically ill definitions.

These are technical definitions.

They should not be assumed from:

• receipt of a particular benefit
• a general medical condition
• inability to work temporarily

Documentation can matter.

Trust structures for disabled or chronically ill beneficiaries can also have specialized rules.

Beneficiary Not More Than 10 Years Younger

An individual can also qualify as an eligible designated beneficiary if the person is:

not more than 10 years younger

than the participant.

Examples can include:

• sibling close in age
• unmarried partner close in age
• friend close in age

The category does not require the beneficiary to be related to the participant.

What If the Beneficiary Is an Estate?

An estate is not an individual designated beneficiary.

If the participant's estate receives the plan benefit, the post-death RMD rules can differ.

IRS guidance generally provides:

Participant died before distributions were required to begin

A non-designated beneficiary can be subject to the:

5-year rule

Participant died after distributions were required to begin

Payments generally continue based on the participant's remaining life expectancy.^[2]

This can be substantially less flexible than naming an individual directly.

What If a Trust Is the Beneficiary?

Trust beneficiary treatment is highly technical.

Some trusts can qualify for "see-through" or look-through treatment so that underlying individual beneficiaries are considered for RMD purposes.

Other trusts are treated as non-designated beneficiaries.

The result depends on:

• trust terms
• beneficiaries
• documentation
• deadlines
• federal regulatory requirements

A trust should not be assumed to have the same 10-year treatment as an individually named beneficiary.

Taxes on Inherited Traditional 401(k) Distributions

A beneficiary who withdraws pre-tax 401(k) money generally includes the taxable portion in ordinary federal income.^[3]

The death of the participant does not convert pre-tax retirement money into tax-free money.

The beneficiary can therefore have:

• no 10% additional early-distribution tax
• but ordinary income tax

on the same distribution.

Those are separate rules.

Death Exception to the 10% Additional Tax

IRS guidance provides that the 10% additional tax generally does not apply to a distribution made:

to a beneficiary or the participant's estate on or after the participant's death.^[5][9]

This is important because the beneficiary can be:

• age 25
• age 40
• age 55

and still potentially avoid the additional tax on a death distribution.

Age 59½ is not the controlling test in the same way it is for the original participant.

Spouse Own-IRA Warning

The death exception can be lost after a surviving spouse converts the account relationship into an ordinary own-IRA relationship.

Assume:

• spouse age 52
• inherited 401(k)
• spouse rolls assets to own traditional IRA
• spouse then takes ordinary IRA distribution

That distribution is now from the spouse's own IRA.

The ordinary early-distribution rules apply.

This is why younger spouses sometimes preserve inherited status until age 59½.

Withholding Is Still Separate

Inherited 401(k) distributions can be subject to federal income-tax withholding.

The death exception to the 10% additional tax does not mean:

• no ordinary income tax
• no withholding
• no Form 1099-R

The beneficiary should distinguish:

1. taxable amount
2. withholding
3. 10% additional tax
4. RMD obligation

These are separate calculations.

What About an Inherited Roth 401(k)?

A designated Roth 401(k) has a different income-tax structure.

For the original participant, current law does not require lifetime RMDs from the designated Roth account.^[1][6]

But after death:

beneficiary RMD rules apply.^[1][2]

The beneficiary cannot assume the inherited Roth 401(k) can remain untouched forever.

Qualified Roth Distributions After Death

A Roth 401(k) distribution can be federally tax-free when the designated Roth qualification requirements have been satisfied.

Death is a qualifying event, but the applicable five-taxable-year participation requirement still matters.

If the five-year requirement is satisfied, post-death Roth distributions can generally be qualified.

If not, earnings can remain taxable under the nonqualified distribution framework.

The account's original Roth start date can therefore matter to the beneficiary.

Roth 401(k) and the 10-Year Rule

Because designated Roth accounts do not have lifetime owner RMDs under current law, the post-death framework generally resembles death before the participant's required beginning date for that Roth source.

For an ordinary designated beneficiary subject to the 10-year rule, the account generally must be fully distributed by the end of year 10.

The absence of lifetime Roth RMDs for the owner does not eliminate the beneficiary deadline.

Traditional and Roth Sources Can Coexist

A 401(k) can contain:

• traditional pre-tax balance
• designated Roth balance
• after-tax contributions

The beneficiary should not assume the entire account has one tax character.

A plan may report or distribute the sources separately.

A rollover may require:

• pre-tax source → inherited traditional IRA
• Roth source → inherited Roth IRA

subject to applicable rules.

After-Tax Basis

If the deceased participant made voluntary after-tax contributions, part of an inherited distribution can represent basis that has already been taxed.

That basis generally should not be taxed again.

Plan records are essential because the beneficiary may not know the participant's historical contribution sources.

Participant Had an Outstanding 401(k) Loan

Death can affect an outstanding plan loan.

Depending on plan terms, the loan can be:

• repaid
• offset against the participant's account
• treated as a distribution under applicable rules

A plan-loan offset can reduce the account passing to beneficiaries.

Beneficiary and estate representatives should review the plan's loan documents rather than assuming the loan disappears at death.

Employer Stock and NUA

If the inherited 401(k) contains employer stock, net unrealized appreciation rules can potentially be relevant.

The participant's death can be a qualifying event for the NUA lump-sum framework.

A beneficiary should therefore identify:

• employer stock
• plan cost basis
• NUA amount
• rollover implications

before automatically rolling the entire inherited 401(k).

The dedicated ROIStreet NUA article explains the tax mechanics.

Year-10 Tax Concentration Risk

The 10-year rule can create tax-planning problems when a beneficiary waits too long.

Assume:

• inherited pre-tax 401(k): $500,000
• participant died before required beginning date
• beneficiary takes little or nothing for nine years
• account grows

A large final distribution in year 10 can create substantial taxable income in one year.

The federal rule can permit deferral.

That does not mean deferral is always tax-efficient.

A Distribution-Smoothing Example

Suppose an inherited pre-tax account starts at:

$400,000

and the beneficiary has a 10-year deadline with no annual federal RMD during years 1 through 9.

Two simplified approaches:

Back-loaded

• Years 1–9: little or no distribution
• Year 10: large remaining balance

Smoother

• Spread voluntary distributions across several tax years

The second approach can potentially reduce income concentration.

But the correct path depends on:

• beneficiary income
• tax brackets
• investment returns
• state taxes
• future income changes
• charitable goals
• account size

The 10-year rule creates a planning window, not a universal withdrawal formula.

Annual RMD Plus Year-10 Deadline Example

Assume:

• participant was already taking RMDs
• participant dies in 2026
• adult child is beneficiary
• child is not an eligible designated beneficiary

The beneficiary generally must:

• take applicable annual RMDs beginning after death
• continue annual distributions under the federal framework
• fully empty the account by the end of 2036^[3][7]

The child cannot simply take zero in years 1 through 9 because the participant died after the required beginning date.

Missing an Inherited-Account RMD

Failure to take a required minimum distribution can trigger an excise tax.

Current IRS guidance states that the general tax is:

25%

of the RMD shortfall.

It can be reduced to:

10%

if corrected within the applicable correction window, generally within two years, and other requirements are satisfied.^[1][2]

The IRS can also waive the tax for reasonable error when required procedures are followed.

A year-10 deadline does not cure an earlier missed annual RMD where annual distributions were required.

Form 5329

A beneficiary can use:

Form 5329

to report certain RMD shortfalls and related excise tax.

A waiver request for reasonable error can also involve Form 5329 and an explanation.

RMD compliance should therefore be reviewed annually rather than only in the final distribution year.

Form 1099-R

Inherited 401(k) distributions are generally reported on:

Form 1099-R.^[4]

A death distribution typically uses reporting that identifies the beneficiary/death character.

The form can show:

• gross distribution
• taxable amount
• federal withholding
• distribution code

A direct rollover is also reportable even when it is not currently taxable.

Beneficiary Name and Taxpayer Identification Number

After death, the plan administrator generally needs beneficiary information before distributions can be processed.

Common administrative requirements can include:

• death certificate
• beneficiary claim form
• taxpayer identification number
• identity verification
• rollover instructions
• inherited IRA acceptance letter

The exact requirements vary by plan and recordkeeper.

Multiple Beneficiaries

A participant can name more than one beneficiary.

Separate-account rules can allow each beneficiary's share to be treated independently if applicable requirements and deadlines are met.

If beneficiary interests remain combined too long, the distribution rules can become less favorable or more complicated.

Beneficiaries should therefore ask the plan administrator about:

• separate shares
• deadline to establish separate accounts
• rollover procedures for each beneficiary

Successor Beneficiaries

If an eligible designated beneficiary later dies before the inherited account has been fully distributed, a successor beneficiary generally becomes subject to a 10-year completion rule.^[7]

The new beneficiary does not necessarily receive a fresh lifetime payout simply because the first beneficiary had life-expectancy treatment.

Likewise, when a participant's minor child reaches age 21, the remaining balance generally enters the 10-year framework.

Plan Terms Can Be Faster Than Federal Maximums

The federal tax rules often establish the longest permitted distribution period.

A plan can require:

• immediate lump sum
• five-year payout
• specified installment schedule
• transfer to inherited IRA

depending on plan design and applicable law.

Beneficiaries should therefore ask two separate questions:

What does federal tax law permit?

and

What does this plan offer?

A Beneficiary Decision Framework

Step 1: Confirm beneficiary status

Identify:

• spouse
• nonspouse individual
• eligible designated beneficiary
• trust
• estate
• charity

Step 2: Confirm the account sources

Identify:

• traditional pre-tax
• Roth
• after-tax basis
• employer stock

Step 3: Determine the participant's RMD status

Did the participant die:

• before required beginning date
• after required beginning date

Step 4: Determine death-year RMD

Was any required amount still unpaid?

Step 5: Identify rollover rights

Spouse and nonspouse rights differ.

Step 6: Determine whether annual RMDs apply

Do not assume the 10-year rule means zero annual distributions.

Step 7: Calculate the final deadline

Determine the applicable:

• life-expectancy schedule
• 10-year deadline
• 5-year deadline
• successor-beneficiary deadline

Step 8: Review tax character

Estimate:

• ordinary taxable amount
• tax-free basis
• Roth qualification
• withholding

Step 9: Review special assets

Check for:

• employer stock
• NUA
• outstanding plan loan

Step 10: Coordinate the distribution schedule

Consider both legal deadlines and tax-year consequences.

Common Inherited 401(k) Mistakes

Assuming every beneficiary gets 10 years

Eligible designated beneficiaries and non-designated beneficiaries can follow different rules.

Assuming 10 years means no annual RMDs

Annual RMDs can be required when the participant died after the required beginning date.

Taking a nonspouse distribution personally before arranging the rollover

A nonspouse beneficiary generally needs a direct rollover to an inherited IRA.

Letting a spouse automatically roll to an own IRA

That can change early-distribution tax treatment for a spouse under age 59½.

Ignoring the death-year RMD

The original participant's unpaid RMD can still need to be distributed.

Assuming Roth means no beneficiary RMDs

Beneficiaries of designated Roth accounts are subject to post-death RMD rules.

Missing the age-21 transition for a minor child

The eligible-designated-beneficiary treatment does not continue indefinitely.

Ignoring the employer's plan terms

The plan may not offer every distribution format the tax law would otherwise permit.

Rolling employer stock without reviewing NUA

The rollover can remove a specialized tax option.

Waiting until year 10 without modeling taxes

A large final distribution can concentrate taxable income.

Frequently Asked Questions

What happens to a 401(k) when the owner dies?

The remaining vested account generally passes under the plan's beneficiary provisions and becomes subject to beneficiary distribution, rollover and RMD rules.

Does an inherited 401(k) have to be cashed out immediately?

Not always. The answer depends on the beneficiary category and plan terms. Many beneficiaries can use a 10-year period, life-expectancy treatment or a rollover to an inherited IRA.

What is the inherited 401(k) 10-year rule?

Most designated beneficiaries who are not eligible designated beneficiaries must fully distribute the inherited defined contribution account by the end of the tenth calendar year after the participant's death.^[1][2][7]

Do I have to take annual RMDs during the 10-year rule?

If the participant died after the required beginning date, annual RMDs generally apply during the 10-year period. If the participant died before the required beginning date and the beneficiary is under the pure 10-year rule, annual federal RMDs generally are not required in years 1 through 9, subject to plan terms.^[3][7]

Who is an eligible designated beneficiary?

Generally a surviving spouse, the participant's minor child, a disabled individual, chronically ill individual, or an individual not more than 10 years younger than the participant.^[2][7]

At what age does a child stop being a minor for this rule?

Current IRS guidance generally uses age 21 for the participant's child under the eligible-designated-beneficiary framework.^[2]

Can a nonspouse beneficiary roll a 401(k) to an IRA?

An eligible nonspouse beneficiary distribution can generally be rolled directly to an inherited IRA through a trustee-to-trustee transaction.^[3][4]

Can a nonspouse beneficiary use a 60-day rollover?

Generally no. If the nonspouse beneficiary receives the distribution personally, it generally is not eligible for the ordinary 60-day rollover treatment.^[4]

Can a surviving spouse roll the account into their own IRA?

Generally yes for eligible rollover amounts. The spouse may also have inherited-account options, and the choice can affect RMD and early-distribution rules.^[3][4]

Are inherited 401(k) withdrawals subject to the 10% early-distribution tax?

Distributions made to a beneficiary because of the participant's death are generally exempt from the 10% additional tax.^[5][9]

Are inherited 401(k) withdrawals taxable?

Traditional pre-tax amounts generally are included in ordinary income when distributed. Roth and after-tax amounts can receive different treatment.

Does an inherited Roth 401(k) have RMDs?

Yes. The original owner has no lifetime RMD from a designated Roth account under current law, but beneficiaries are subject to post-death RMD rules.^[1][2]

What happens if I miss an inherited 401(k) RMD?

The shortfall can be subject to a 25% excise tax, potentially reduced to 10% if corrected within the applicable correction period. Waiver relief can also be available for reasonable error.^[1][2]

The Bottom Line

An inherited 401(k) is not governed by one universal rule.

The correct analysis begins with:

Who is the beneficiary?

Then ask:

• Is the beneficiary the surviving spouse?
• Is the beneficiary an eligible designated beneficiary?
• Did the participant die before or after the required beginning date?
• Is the account traditional, Roth or mixed?
• Does the plan permit continued beneficiary ownership?
• Is a rollover available?
• Are annual RMDs required?
• What is the final distribution deadline?

For most adult nonspouse beneficiaries, the major framework is the 10-year rule.

But the participant's RMD status changes how that 10-year period works.

A participant who died before the required beginning date can leave a beneficiary with more timing flexibility.

A participant who died after the required beginning date can leave a beneficiary with both:

annual RMDs and a year-10 deadline.

A surviving spouse has broader choices and should pay particular attention to whether inherited status or own-account treatment better fits the spouse's age and distribution needs.

And a nonspouse beneficiary considering a rollover must remember:

direct means direct.

The inherited plan should generally move directly to an inherited IRA rather than passing through the beneficiary first.

The most useful question is not simply:

"How long do I have to withdraw an inherited 401(k)?"

It is:

"What beneficiary category am I in, had the participant begun the RMD regime, what options does the plan offer, and which distribution schedule applies to this specific account?"

That is the framework that determines the answer.

Sources & References

1. IRS: Retirement topics — Required minimum distributions (RMDs)
2. IRS: Retirement plan and IRA required minimum distributions FAQs
3. IRS: Publication 575 — Pension and Annuity Income
4. IRS: Instructions for Forms 1099-R and 5498 (2026)
5. IRS: 401(k) Resource Guide — General Distribution Rules
6. IRS: Notice 2026-13 — Safe Harbor Explanations for Eligible Rollover Distributions
7. IRS: Final Regulations — Required Minimum Distributions, TD 10001
8. IRS: Publication 590-B — Distributions from Individual Retirement Arrangements
9. IRS: Topic no. 558 — Additional tax on early distributions from retirement plans other than IRAs

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