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New rollover option for 401(k) beneficiaries

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in Small Business Tax

Q. My two children are my 401(k) beneficiaries. If I retire, should I roll over the 401(k) to an IRA? C.B.N., Omaha, Neb.

Not necessarily. Previously, it was more advantageous for nonspouse beneficiaries to inherit an IRA than a 401(k). Reason: The 401(k) generally had to be emptied out within five years of death while IRA payments could be stretched over a longer time. However, beginning Jan. 1, 2010, all 401(k) plans must permit rollovers for nonspouse beneficiaries. (Some already do.)

Tip: Other factors, such as the investment mix in the 401(k), come into play. Discuss it with a financial pro.

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