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Legacy Planning for my 401

By Terry Savage on February 11, 2017 | Financial Planning / Retirement

I am retired and not active at work. My company's 401 is paying a great fixed rate so I don't want to move it from them. I am single and have 3 children. If I pass can my children do a stretch IRA with my 401monies??

Terry Says

You're wise to consider this issue now.  There are some important rules for inherited 40l(k) plans, and it would take too long to explain them here.  So here is a link to an article on the Fidelity website, that gives you a full and complete answer.  But there are two important additional issues.  First, you should check with your own company 40l(k) plan as to its distribution requirements on the death of the owner.  (Some plans require an immediate distribution -- see article).  Second, you should educate your children about their option to either take a stretch option from the original 40l(k) if  the plan allows it and if you have not reached age 70-1/2.  Or likely a better option would be to have the three equal beneficiaries each roll the money into an inherited IRA.  Then, depending on your age at death, and whether you have started taking MRDs, they can possibly stretch required withdrawals over their lifetimes, leaving the money more time to grow tax-deferred.



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