When Does a Non-Spouse Beneficiary Have to Withdraw an Inherited 401(k)?

A designated beneficiary who is not an eligible designated beneficiary must have the entire account distributed by the end of the calendar year that includes the tenth anniversary of the owner's death. Whether a withdrawal is also required in the intervening years depends on whether the owner died before, or on or after, the required beginning date.

Only when the owner died on or after the required beginning date: the annual distribution requirement then continues for every year until the account is empty, with the 10-year deadline on top. For a death before that date, the regulation requires only that the account be emptied by the end of the deadline year. The regulations apply to calendar years beginning in 2025.

No. A distributee other than the employee or the surviving spouse may not roll over a plan distribution. The Code instead provides a direct trustee-to-trustee transfer to an IRA established to receive it, which is then treated as an inherited IRA subject to the post-death rules.

25% of the amount that should have been withdrawn but was not, paid by the beneficiary. The rate drops to 10% when the missed amount is withdrawn from the same plan and a return reflecting the tax is filed, both inside the correction window, which ends at the earliest of a notice of deficiency, an assessment, or the last day of the second taxable year after the year the tax applies to. The IRS may waive the tax for reasonable error on a Form 5329 request, and the regulation waives it automatically in two cases.