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Life changes—so should your beneficiaries

Check Your Legacy

You work hard and save diligently to build your retirement funds—and you'll want to make sure they're distributed according to your wishes if anything happens to you.

What is a beneficiary?

Beneficiaries are the people or entities that will receive your retirement funds should you pass away. Your accounts' beneficiary designation(s) are critical because they generally override all other estate documents, including wills.

"Retirement accounts are among most investors' largest assets," says Joe Swanson, an employee benefits and retirement financial services representative for the Principal Financial Group® in Minnetonka, Minnesota. "You wouldn't take a chance on who inherits your home. Why would you do that with your retirement savings?"

What might you consider?

When naming your beneficiaries, keep these important points in mind:

  • Life changes, and so should your beneficiaries.
    Divorced? Remarried? A birth or a death in the family? All of these life-changing events are likely to call for updates to your beneficiaries. If you designate a charity to inherit your savings, check periodically to make sure it's still operating.
  • Default beneficiaries might not align with your wishes.
    If you don't name a beneficiary, retirement funds in workplace retirement plans and Individual Retirement Accounts generally must go to your spouse—even if you meant to leave the money to children or other recipients[1]. If you're single and don't name a beneficiary, your retirement funds could go directly to your estate, which means the courts would determine how they should be distributed. And that can be a long, expensive process.
  • Remember to designate a custodian for minor children. If you name a minor (generally someone under 18[2]) as your beneficiary, you'll need to designate a custodian to manage the money in this person's interest, should something happen to you. If you don't, the state may decide for you, and the beneficiary could end up being someone you wouldn't have chosen.

Take the next step

Periodically review your beneficiaries to ensure that distributions will be paid to the right people and in a timely manner.


[1]
Naming someone other than a spouse requires the spouse’s signature.
[2]
The age of a minor can vary by state. Be sure to know rules regarding naming a custodian and the age of a minor for your applicable state.

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