Personal Finance

My sister passed away 15 years ago, and her 401(k) is still tied up — how can we access it?

Rich Duprey

Published: January 13, 2025 10:11 am

One of the benefits of a 401(k) account is allowing the power of time and compounding to create a sizable retirement nest egg. Simply investing in an S&P 500 index fund can generate substantial returns. The stock market has grown at an average 10.2% annually for over a century, and though it’s never a straight line higher, you can mimic the performance of the market and match those returns.

This was brought to mind by a Redditor’s post on the r/personalfinance subreddit about his sister’s 401(k) that has lain dormant for 15 years since her death. He wants to know how the family can access the account.

24/7 Wall St. Key Points:

• Using a 401(k) is an excellent tool to save for retirement as the magic of time and compounding can have it grow into a substantial nest egg over time, even if additional funds aren’t contributed to it.
• Equally essential is to ensure proper documentation on beneficiaries and estate administration in the event of an untimely death.
• Also: Is your 401(k) optimized for your retirement plans? (Sponsored)

The situation

The Redditor’s sister died in 2009 and at the time had $25,000 in it. While she had married shortly before passing, her husband had disclaimed any interest in the money and subsequently moved overseas.

Recently the 401(k) plan administrator contacted the Redditor’s father, who is in his 80s, telling him he is the account beneficiary. While the administrator said it was only necessary to send in a death certificate, he is easily confused these days and gets emotional about certain issues.

The family wants to be certain it can access the account before bringing the matter up to him and whether it would even be worth it from a valuation standpoint after all this time.

The importance of a clearly defined beneficiary

Now I’m not a financial advisor, so these are just my opinions, but typically under ERISA (Employee Retirement Income Security Act) rules, a spouse is automatically the beneficiary unless they waive their rights in writing. Because the Redditor’s sister’s husband was the initial beneficiary, he must have explicitly disclaimed the inheritance for the funds to pass to another beneficiary like the Redditor’s father. 

Given that the spouse stated he wanted nothing to do with it, there is a possibility he might have disclaimed it to the plan administrator, which would explain why the  father is now being contacted, or they may have been unable to locate him.

If there was no contingent beneficiary named (or if the plan’s documentation dictated otherwise), the funds might revert to the sister’s estate. 

As the administrator contacted him, it suggests one or the other and the father may have been listed as a secondary beneficiary. Alternatively, it may have come to him by default through the estate.

Potential account value

As mentioned, depending upon how the 401(k)’s assets were invested, the account could hold substantial value or they could be worth almost nothing.

By investing in the SPDR S&P 500 ETF Trust (NYSEARCA:SPY), which was created in 1993, the account could have grown considerably over the past 15 years. It would be worth approximately $222,500 with dividends reinvested today, a 15.7% CAGR.

Despite numerous corrections, crashes, and bear markets, not to mention recessions and depressions, subsequent bull markets have wiped away all vestiges of those downturns and the market has gone on to hit new highs. Rarely, though, has it ever returned exactly that percentage. 

However, if individual stocks were bought rather than an index fund, anything is possible. Owning video rental chain Blockbuster, for example, or Sears Holding, would have the account be worth nothing. Shares of Walmart (NYSE:WMT), though, could still hold substantial value as the $25,000 would have turned into $172,660, including dividends. Nvidia (NASDAQ:NVDA) would be worth over $20 million.

Plan fees may also erode the total value of the account.

Next steps

It’s crucial to get in touch with the 401(k) administrator. By providing the sister’s death certificate,  you can get the exact details on the account’s current value, any fees charged since 2009, and the beneficiary status. 

Also ensure any necessary documents like a marriage certificate (to confirm spousal status) and any communication where the spouse disclaimed the inheritance are available.

Regardless of the account’s value, follow through on the process. Even if the 401(k)’s value is greatly diminished, it can bring closure to the father and possibly provide the basis for a fond remembrance of his daughter.