Inherited 401(k) Rollover Rules: Spouse vs. Non-Spouse Beneficiary

Inheriting a 401(k) is not the same as inheriting your own. The rules governing what you can do — roll it over, how fast you must withdraw, whether annual distributions are required — hinge almost entirely on one question: are you the surviving spouse, or someone else?

If you are the surviving spouse

Surviving spouses have more flexibility than any other beneficiary type. You have three main paths:

Option 1: Spousal rollover to your own IRA (most common)

You direct the 401(k) plan to transfer the balance to your own traditional IRA (or Roth IRA, if inheriting a Roth 401(k)). Once done, the account is treated as if you always owned it. The consequences:

• RMDs defer to age 73 or 75 (depending on your birth year under SECURE 2.0).² If you are 57 and inherit a large account, this can be 16+ years of continued tax-deferred compounding.
• No 10-year rule. The 10-year rule for inherited accounts does not apply because this is now your own IRA.
• Subject to 10% early-withdrawal penalty if you take distributions before age 59½. This is the one downside vs. keeping it as an inherited account.

Option 2: Keep as an inherited beneficiary IRA (spousal option)

Rather than rolling to your own account, you maintain a separate inherited IRA titled as "John Doe, deceased, for the benefit of Jane Doe, beneficiary." As the surviving spouse using this option:

• No 10% early withdrawal penalty — distributions from an inherited IRA are not subject to the early withdrawal penalty regardless of your age.³ This matters if you are under 59½ and need income from the account.
• RMDs can be deferred until December 31 of the year your deceased spouse would have reached their required beginning date, or until December 31 of the year following death — whichever is later.¹ You can delay substantially if your spouse was younger than you.
• At any point, a surviving spouse can roll an inherited IRA into their own IRA. Common strategy: use inherited-IRA status until age 59½, then roll to own IRA to reset the RMD clock.

Option 3: Take a lump-sum distribution (rarely right)

You can take all the money at once. The full amount is taxable as ordinary income in the year distributed. On a $1 million account, that could push you into the 37% bracket and trigger IRMAA surcharges on Medicare premiums. Do the math before choosing this path.

Special note: what the 401(k) plan offers matters

Plan administrators are not required to offer all the distribution options permitted by federal law. Some employer plans force a distribution (or accelerated timeline) rather than allowing you to maintain the account and stretch distributions. If you're inheriting a 401(k) — not an inherited IRA — confirm with the plan what options they support. Then transfer to an inherited IRA at a custodian of your choosing if the plan's options are unfavorable.

If you are a non-spouse beneficiary

Non-spouse beneficiaries — adult children, siblings, nieces, nephews, domestic partners, trusts — cannot roll an inherited 401(k) into their own IRA. The only option is a direct trustee-to-trustee transfer to an inherited IRA (also called a beneficiary IRA).

To do it correctly: instruct the 401(k) plan to make a direct trustee-to-trustee transfer to "Jane Smith as beneficiary of John Smith," with the IRA custodian you choose. No check should be payable to you personally.

The 10-year rule

Under the SECURE Act (effective for deaths on or after January 1, 2020), most non-spouse beneficiaries must empty the inherited account by December 31 of the 10th year following the year of the account owner's death.⁵ Example: account owner dies in September 2024 — all funds must be withdrawn by December 31, 2034.

There is no minimum annual distribution requirement in years 1–9 under the 10-year rule alone — unless the decedent had already started RMDs. See the next section.

Annual RMDs within the 10-year window (if decedent was past RBD)

This is where the rules became significantly more complex. Under final IRS regulations (Treasury Decision 10001, July 2024), the answer depends on whether the account owner died before or after their Required Beginning Date (RBD).⁶ These final regulations apply to the 2026 distribution year and beyond.

What is the Required Beginning Date? For most account owners, it is April 1 of the year following the year they turned their applicable RMD age — age 73 for those born 1951–1959, or age 75 for those born in 1960 or later under SECURE 2.0.² A 74-year-old who dies in 2025 was past their RBD. A 71-year-old who dies in 2025 was before their RBD.

Penalty for missing annual RMDs: Under SECURE 2.0, the excise tax for missed RMDs is 25% of the amount that should have been distributed (reduced to 10% if corrected in a timely manner).⁷ The IRS has issued penalty relief for 2021–2024 while the final regulations were being finalized, but that relief no longer applies for 2025 and 2026 onward.

Eligible Designated Beneficiaries — exceptions to the 10-year rule

Five categories of beneficiaries are classified as Eligible Designated Beneficiaries (EDBs) and can use a life expectancy (stretch) method instead of the 10-year rule:⁵

1. Surviving spouse — as described above.
2. Minor children of the account owner — until the child reaches the age of majority (21 in most states, as interpreted by the IRS). At that point, the 10-year rule kicks in for the remaining balance.
3. Disabled individuals — as defined under IRC § 72(m)(7).
4. Chronically ill individuals — as defined under IRC § 7702B(c)(2).
5. Individuals not more than 10 years younger than the deceased account owner — e.g., a sibling or partner close in age.

EDB status must be established at the time of death, not later. If you believe you qualify, document it with the plan and the inherited IRA custodian at the time of transfer.

Three real-dollar examples

Example 1: Surviving spouse, age 56, inherits $1.1M traditional 401(k)

Maria's husband died at 67, before his RBD. She is 56. She has two options worth modeling:

• Spousal rollover to own IRA: She rolls the $1.1M into her own traditional IRA. RMDs don't begin until age 73 — 17 years from now. At 7% average growth, the account reaches ~$3.3M before RMDs start. No annual RMD requirement now. But if she needs income before 59½, any distribution is subject to the 10% early-withdrawal penalty.
• Keep as inherited IRA until 59½, then roll to own IRA: She maintains the inherited IRA for the next 3.5 years (no 10% penalty on distributions). At 59½, she rolls the inherited IRA into her own IRA and restarts the RMD-deferral clock. This hybrid strategy is common for spouses who are under 59½ and want flexibility.

Example 2: Adult son inherits $650K from a parent who was 77 at death (past RBD)

David's mother was 77 and had been taking RMDs when she died in early 2025. David is 48. He transfers the account to an inherited IRA. The 10-year rule applies, and because his mother died past her RBD, annual RMDs are required in years 1–9.

His life expectancy factor from IRS Table I at age 49 (the year after the owner's death) is approximately 35.1.⁸ Year-1 RMD: $650,000 ÷ 35.1 = ~$18,500. That amount rises as his life expectancy divisor shrinks each year. By year 10, he must distribute the full remaining balance. If he takes only the annual minimums in years 1–9, the year-10 distribution on a $650K account compounding at 6% is roughly $900K in one tax year — a potential 37% bracket event. Many beneficiaries in this situation front-load distributions in years of lower income to avoid a year-10 tax spike.

Example 3: Adult daughter inherits $400K Roth 401(k) from parent who died at 69 (before RBD)

Rachel inherits a Roth 401(k). Her parent died at 69, before the age-75 RBD. She transfers to an inherited Roth IRA. Because the account is Roth and the decedent died before RBD, no annual RMDs are required in years 1–9. She simply must empty the account by December 31 of year 10. If she leaves it invested at 7% growth for the full 10 years, $400K becomes ~$787K — fully tax-free when distributed, assuming the Roth 401(k) had satisfied the 5-year qualified distribution period (which began when her parent opened the account).⁹

Comparison: options at a glance

Common mistakes that cost beneficiaries money

1. Non-spouse beneficiary takes a distribution instead of a direct transfer. Any check payable to you is a taxable distribution. There is no 60-day rollover rule for inherited accounts — unlike a regular rollover, you cannot undo it.⁴
2. Surviving spouse rolls to own IRA while under 59½ and then needs money. Once in your own IRA, early distributions trigger the 10% penalty. The fix: maintain inherited IRA status until 59½, then roll.
3. Not taking annual RMDs when decedent was past RBD. Many beneficiaries and even plan administrators were confused about the annual RMD requirement within the 10-year window. The IRS issued penalty waivers for 2021–2024 while regulations were finalized, but those waivers are gone. Missing 2025 or 2026 annual RMDs triggers a 25% excise tax.
4. Assuming a large year-10 distribution is fine. When annual minimums are taken in years 1–9, year 10 can be massive. A $600K account compounding for 9 years at 6% is roughly $1.01M in one distribution — taxed entirely at ordinary income rates. A distribution strategy that front-loads withdrawals in low-income years can save six figures in federal tax.
5. Failing to check whether the 401(k) plan offers inherited-account options. Some plans force distribution rather than allowing you to maintain the account or do a trustee-to-trustee transfer. Acting before checking can lock you into a worse outcome. Always contact the plan administrator first.