Updated: Feb 12, 2020
“And two shall become one.” Traditional marriage vows included that phrase, and maybe you remember hearing that at your wedding. After decades of marriage, you two crystallized into a unified entity of one: one tax return, one home, one bar of soap, one opinion on the Super Bowl halftime show. After the death of a spouse, “two shall become one” applies to inherited retirement accounts as well.
In our series on how to manage finances after the death of a spouse, we’re exploring tips from FINRA, a reliable financial source. Today, Tip 6b: Your Spouse’s IRA and 401(k) – Options on What to Do.
In our previous article, Tip 6a, we talked about how retirement accounts like 401(k)’s and IRAs have rules that are different from other kinds of financial account vehicles. When you inherit your spouse’s 401(k) or IRA (unlike if you were to inherit from someone else like a parent, sibling, child, or other person), that spousal 401(k) or IRA becomes your own. That makes inheriting a 401(k) or IRA from a spouse much easier and simpler.
Options for an Inherited Spousal 401(k) or IRA
As the IRS explains, you have three choices to make it your own. You can:
· Option 1 – Roll it over into your own IRA in your name
· Option 2 – Designate yourself as the account owner
· Option 3 – Keep yourself as the beneficiary