What you need to know about choosing a beneficiary for your 401(k) plan

Arizona estate planning attorneyPlanning for retirement can be a difficult process. It’s not just a matter of deciding how much money to put aside – you also need to consider who will receive the money if you die before the retirement fund is gone.

The person who receives the money from your 401(k) plan is known as the beneficiary. You might have one person in mind, but you also may want to consider several beneficiaries who may receive different amounts of money.

You may be thinking that you listed your 401(k) beneficiary in your will, but the person named on your 401(k) beneficiary form typically supersedes the information in your will. You will need to keep your form up to date if you want the money to go to the intended person.

It can be challenging to make sure you get all the details correct when creating a savings plan for retirement. An Arizona estate planning attorney can help make sure your money goes exactly where you want it to go.

Assigning beneficiaries for your retirement savings

U.S. News and World Report recently published a helpful guide explaining how to pick a beneficiary for your 401(k) plan. The article can help you get up to speed with the process.

First, you need to assign a beneficiary. That individual will be able to obtain your financial bequest without having to go through the court system or access your will. Often, the beneficiary is a spouse, child or other close relative. If you decide to name someone other than a spouse, that person may need to sign a spousal consent form. However, you can list more than one beneficiary. The primary beneficiaries you name may all receive the same amount of money, or you can assign a specific percentage to each individual.

Your next step is to consider contingent beneficiaries. These are people who would receive your financial bequest if all the primary beneficiaries die. For example, let’s say you name your spouse as the sole primary beneficiary. You may outlive your spouse and forget that he or she was the only person listed. By having a contingent beneficiary, you make sure your assets will go to the individual you have chosen.

It's important to remember to review your 401(k) plan after significant events in your life. When you get married, you may want to remove your parents as primary beneficiaries and add your spouse. If you have a new baby, you may want to list your son or daughter on the plan. A divorce or remarriage also may be a time to revisit your plan.

You may have changed jobs and have created multiple 401(k) plans. Each plan will ask for a beneficiary, but you will need to update all of your plans or roll them into one 401(k) plan.

Lastly, it’s important to inform your beneficiaries that they are named in your plan. Let them know where you have accounts. They may need to contact the financial institution in order to receive the financial bequest.

Planning for retirement can feel like an overwhelming process, but you don’t have to go it alone. Contact Brown, Naegle, Crider & Jensen LLC for a consultation.

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