Can a spouse rollover part of their 401(k) or 403(b) to their partner while they are still alive?
Can a spouse rollover part of their 401(k) or 403(b) to their partner while they are still alive? When you rollover your 401(k) or 403(b) accounts pretax, do you pay the tax immediately, or after you've filed taxes for that year?
What are you hoping to accumplish my rolling over a portion of your 401(K) or 403b to your spouse? There is no way to do this while alive and still married. but perhaps you have some other financial goal in mind we could come up with a creative solution.
On the other hand if you are getting divorced (hopefully not....) there is a thing called a QDRO which allows you to split retirement accounts according to your divorce decree.
Best of luck.
Outside of a qualified divorce settlement, a 401k / 403b cannot move from one spouse to the other while both are alive.
There are no taxes due on a properly executed rollover from a 401k to a Traditional IRA. If you then convert the Traditional IRA to a Roth IRA, you would have to claim the converted amount as income when you file your taxes for the year of the conversion.
Thanks for your questions.
Hi! As Advisor Chip Workman writes, your IRA/401(k) is your own while alive and can’t be given or rolled over to your spouse while you are still alive. The IRA/401(k) is one of the few investments that can’t be jointly titled or combined in marriage. My husband and I have all of our financials jointly owned except those retirement plan assets, and we wish could just own everything together! After one spouse passes away, the other spouse does get to assume the IRA/401(k) as their own in a way that is different from when an non-spouse (like your child or sibling) inherits. Investopedia columnist Roger Wohlner has a great article on this topic.
To answer the second part of your question, I need to explain some terms first!!! When you ask about rolling over your IRA/401(k)/403(b) pre tax, I’m assuming you are talking about Traditional IRA/401(k)/403(b)s, which are made up of money you have contributed BEFORE you’ve paid tax on in contrast to Roth IRA/401(k)/403(b)s which are retirement accounts where you put money on which you have already paid tax (which means when you take the money out, you don’t have to pay tax again). And I’m also assuming that you mean “roll over” where you are taking the money in that IRA/401(k)/403(b) and moving it directly to another IRA/401(k)/403(b) rather than taking a “distribution” where you are planning to keep the money or roll it into a Roth IRA/401(k)/403(b).
Here are some simplified guidelines (of course there’s always lots of extra stuff that goes along with this, but this will give you a general idea):
- If you roll over a Traditional IRA/401(k)/403(b) into a Roth IRA/401(k)/403(b), you WOULD need to pay taxes on that conversion but no penalty.
- If you roll over a Traditional IRA/401(k)/403(b) directly into a different Traditional IRA/401(k)/403(b) you DO NOT need to pay taxes.
- If you withdraw a Traditional IRA/401(k)/403(b) to then put it in different Traditional IRA/401(k)/403(b) within 60 days, you DO NOT need to pay taxes; however, if you don’t get it back in within 60 days or if you do this more than once a year, you WOULD pay taxes, but not immediately but when you do your tax return for that year.
- If you are deliberately taking a “distribution” of a Traditional IRA/401(k)/403(b) , you could ask the brokerage or holding company to withhold the taxes for you and thus pay them “immediately.” Many will do this, effectively letting you pay your tax “immediately” so that you don’t have to worry about coming up with the money later.
You can read more about the rules and “catches” involved with rollovers in this great article by Investopedia columnist George D. Lambert.
Hopefully this explanation helps!! Thanks so much for writing to us and please write back with more questions.
Generally speaking, no, a spouse cannot rollover their 401(k) or 403(b) to their partner or anyone else for that matter without triggering some kind of distribution. You can rollover plans where you no longer work into an IRA in your own name without incurring a taxable situation, but once you withdraw a dollar from the IRA, it will be taxable to you as ordinary income. If you're under the age of 59 1/2 and the distribution is not for a set few number of reasons, it will also incur a 10% penalty.