Inheriting a 401(k) comes with specific rules based on your relationship with the account holder; spouses have more options than other beneficiaries regarding distributions.
Surviving spouses can take a lump sum distribution from an inherited 401(k) without incurring early withdrawal penalties, although the distribution will be taxed as ordinary income.
For non-spouse beneficiaries, understanding your options regarding inherited 401(k) distributions is vital, as your tax implications and distribution rules differ significantly.
If you're a minor child or chronically ill, you can take distributions based on your life expectancy, allowing flexibility different from standard rules.
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