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Figured this was the best section in which to post.
Granted it may be an unusual topic but one that one realistically needs to think about.
When one person
dies passes away
is the spouse able to cash it out or must they wait until retirement age?
What happens if only the children are left? Are they able to cash it out or must they also wait to retirement age?
If either is able to cash out are they getting heavily taxed or do they get a break?
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I don't know about your spouse but I can speak for your children. Having gone through this (Grandmother), I can give you limited advice that you should double check with a pro.
If I recall correctly, the 401k can be rolled over to an Inherited IRA. You may cash out of the inherited IRA without penalties but that would be an extremely foolish thing to do since you can stretch an inherited IRA over the rest of your life by only taking RMDs (Required Minimum Distributions). Why give up the tax benefit of the inherited IRA any sooner than you have to? The government would LOVE IT if you cashed it out. They've been salivating at the thought of closing the "Stretch IRA" loophole for years.
Yes, you will be taxed on any distributions you take from an Inherited IRA or 401k just like you would had it been your IRA or 401k and you reached retirement age. Once again, this advice is only based on children who inherit a 401k/IRA. The rules are likely different for a spouse but I doubt she would have the ability to cash out penalty free prior to retirement age and there will most certainly be taxes to be paid as is the case whether you die or not.