Inherited 401(k): Everything Beneficiaries Need to Know

You should do everything you can to take full advantage of the financial opportunity that inheriting a workplace retirement account gives you.

By Kailey Hagen – Updated May 2, 2025 at 10:40 PM

Key Points

Beneficiaries will be responsible for taxes if the money comes from a traditional 401(k).
Options for 401(k) withdrawals include lump sums, rollovers, and fixed-period distributions.
Strategies differ for spouses versus other beneficiaries, affecting taxes and access to funds.

In a perfect world, you would save just as much money as you needed for retirement in your 401(k). But sometimes, people end up saving more than they can spend before they die. When that happens, whomever the account owner named as their beneficiary receives the remaining funds in an inherited 401(k). If you've just found out you're inheriting a 401(k), here are a few things you should know.

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Three eggs in a basket made of dollar bills with 401(k) written on one of the eggs. — Image source: Getty Images.

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About the Author

Kailey Hagen, CFP, is a contributing Motley Fool retirement analyst covering Social Security, Medicare, and retirement planning. Before The Motley Fool, Kailey was a research analyst for Reviews.com focusing on credit and banking products. She is a Certified Financial Planner® and holds a bachelor’s degree in English from the University of Wisconsin-Madison.

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