Nicholas J. Colantuono, CFP® answers FAQs on 401(k)s on WCVB Channel 5 in Boston.
When inheriting a 401(k) account, there are a few things to know before you start taking out money.
You can begin to withdraw penalty-free if you are over the age of 59 1/2. This money will be counted as part of your income the year you take it.
If you withdraw large amounts of money from this account to buy something like a home, it could affect you from a tax standpoint.
Some 401(k)s offer a Roth option within the plan; you can make decisions on where your contributions are going, whether it’s the pre-tax bucket or the Roth bucket.
It’s important to know how the money in your plan is currently structured; is it pre-tax? If so, and you move it over to a Roth, you will be paying taxes on all of it.
When speaking to a financial advisor, they will need to know how old you are before recommending that you move out of that plan altogether and into a Roth.
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