Who gets my 401(k) when I die?

Your 401(k) goes to the beneficiary you named on the plan form — not through your will. If you're married, your spouse is the default beneficiary (federal law requires spousal consent to name someone else). If no beneficiary is named, the funds go to your estate.

Do beneficiaries pay tax on inherited 401(k)?

Yes. Traditional 401(k) distributions are taxed as ordinary income to the beneficiary when withdrawn. Spouses can roll the 401(k) into their own IRA and defer taxes. Non-spouse beneficiaries must empty the account within 10 years under the SECURE Act.

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

Under the SECURE Act (2019), most non-spouse beneficiaries must withdraw the entire inherited 401(k) within 10 years of the account holder's death. There are no required annual minimums within that 10 years, but the account must be emptied by December 31 of the 10th year.

What Happens to Your 401(k) When You Die?

Your 401(k) goes to your named beneficiary — not through your will or probate. Spouses get the most flexibility (they can roll it into their own IRA). Non-spouse beneficiaries must empty the account within 10 years under the SECURE Act.

Who Inherits Your 401(k)

Beneficiary Status	What Happens
Named beneficiary (spouse)	Spouse inherits; can roll to own IRA
Named beneficiary (non-spouse)	Inherits; must follow 10-year rule
No beneficiary named (married)	Spouse inherits by default (ERISA)
No beneficiary named (single)	Goes to estate — subject to probate
Ex-spouse still listed	Ex-spouse inherits (update your beneficiary!)

Spousal vs. Non-Spouse Beneficiary Options

Option	Spouse	Non-Spouse
Roll into own IRA	✅ Yes	❌ No
Stretch over life expectancy	✅ Yes	❌ No (10-year rule)
Delay withdrawals until own RMD age	✅ Yes	❌ No
Take lump sum	✅ Yes	✅ Yes
10-year distribution	✅ Optional	✅ Required
Remain as beneficiary of the plan	✅ Yes	✅ Yes (some plans)

The 10-Year Rule (SECURE Act)

Category	10-Year Rule Applies?	Alternative
Spouse	❌ No (can use own life expectancy)	Roll to own IRA
Minor child	❌ No (until age of majority, then 10-year clock starts)	Life expectancy until 21
Disabled beneficiary	❌ No	Life expectancy
Chronically ill beneficiary	❌ No	Life expectancy
Beneficiary < 10 years younger than deceased	❌ No	Life expectancy
All other non-spouse beneficiaries	✅ Yes	Must empty within 10 years

Tax Impact for Beneficiaries

$500,000 traditional 401(k) inherited by non-spouse beneficiary (22% bracket):

Strategy	Annual Withdrawal	Tax per Year	Total Taxes
Withdraw evenly over 10 years	$50,000/year	$11,000	$110,000
Wait and withdraw in year 10	$500,000 in year 10	$150,000+	$150,000+
Strategic withdrawals in low-income years	Varies	Varies	Can minimize significantly

Spreading withdrawals over 10 years keeps you in a lower tax bracket. Waiting until year 10 creates a massive tax bill.

Roth 401(k) Inheritance

Detail	Traditional 401(k)	Roth 401(k)
Beneficiary pays income tax	✅ Yes	❌ No (tax-free)
10-year rule applies (non-spouse)	✅ Yes	✅ Yes
Spouse can roll to own Roth IRA	✅ Yes (to traditional IRA)	✅ Yes
RMDs for beneficiary	✅ Yes	✅ Yes (but tax-free)

What You Need to Do Now

Action	Why
Name a beneficiary	Without one, funds go to estate (probate, delays, possible wrong recipient)
Name contingent beneficiaries	Backup if primary beneficiary dies first
Update after life events	Marriage, divorce, birth, death
Review every 1-2 years	Beneficiary forms override your will
Inform beneficiaries	They need to know the account exists and where it’s held

The Bottom Line

Your 401(k) beneficiary designation is the most important estate planning document most people overlook. It overrides your will. Name a beneficiary, name a contingent, and update after every major life event. For beneficiaries: spouses should roll to their own IRA, and non-spouse beneficiaries should spread withdrawals over 10 years to minimize the tax hit.