What happens to 401K after death?

[Anonymous]

I assume the surviving spouse inherits it. But does it roll into their own 401k, to be used only when that person retires? Or does it pay out as cash pretty quickly with income taxes applied?

I've avoided these kinds of questions for 25 years of marriage because it always seemed creepy to ask. And my husband doesn't do financial planning at all. He's retiring very soon with almost no plan in place.

Since he is quite a bit older and I'm in my mid-fifties, I'm wondering if I'd have access to his 401k funds when I'd need them most. Our emergency savings would only last 6 months.

Thanks for your advice.

[Anonymous]

Once he retires, he can roll it to Traditional IRA. Make sure you are set up as the primary beneficiary. If he dies usually spouses have the option to roll it into a Trad IRA in their own names to keep that tax deferral going OR an inherited IRA to get immediate access without the 10% early distribution penalty, but needing to pay taxes of course. Before you take any action with the IRA after his death, make sure you get good advice and take the right action for your circumstances.

Will you guys have any pension? Just planning to live off Social security? Do you work? You should really put some time and effort into both financial planning and estate planning. It is not creepy to take care of the people you love and make sure they know what to do in the event of your death... it's smart and loving.

[Anonymous]

Don't assume somethingg as there are several ways it can be set up. Please see a financial advisor and talk about how to manage your money for retirement -- lots of options are available.

To fine a financial advisor, ask friends/family for recommendations. And meet with a few. Maybe try a large financial institution (like Fidelity) and a small, local person for comparison.

FWIW: my experience with an independent advisor wasn't great so we ended up switching to a larger institution.

Also, make sure you keep your whilst up-to-date.

[Anonymous]

You really should go see an estate lawyer asap to get all your ducks in a row. Who knows, you could get hit by a bus tomorrow and leave him widowed, grieving, and in no right mind to deal with financial realities?

Dealing with these things while everyone is still healthy and in their right minds is the responsible -- and loving -- thing to do, to help care for the surviving spouse. It's not creepy -- it's life. We are all going to die and have no guarantees about when that will happen.