Q: inherited a 401k as a beneficiary. what is the best way to handle it? was told to set up an inherited 401k plan, take
a deduction now, and smaller deductions over time. Is this the best option?
A: I am not sure what deductions you would be allowed with an inherited IRA. However, you can roll the 401K into an inherited 401K that will allow you to stretch the distributions from the plan based on your life expectancy. Sometimes, the inherited 401k requires that the whole amount is distributed within a 5 year- period so it somewhat depends on the rules associated with the 401k you inherited. However, I would roll it into an Inherited 401K and begin making the distributions over your life expectancy allowing for longer periods of tax-deferred growth with the rest of the money.
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