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For her current 401k, most people just roll it into an IRA unless;

1) They have great investments options in the 401K(or their next employers 401k) that they can't get in an IRA.

2) They plan on withdrawing the money between 55 and 59.5. When the appropriate hoops are jumped through, you may be able to withdrawal money from 401K without any penalty a few years earlier.

3) There is company stock in the 401K. This has all sorts of special tax considerations that need to be looked at before doing anything.

I think that this may have changed, but it used to be that the 401K owner died, and the 401k was inherited by someone other than the spouse, that it all was taxed immediately instead of being passed on as an inherited IRA which would cause much higher taxes. I think that this has changed but if you choose to keep it in a 401K you should verify that this is no longer a problem.

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