One of the most important things you can do to manage your retirement plan account is to designate your beneficiaries, but quite often, people miss this crucial step when enrolling in their plan. In fact, 48% of people don’t have a named beneficiary.*
A beneficiary is someone your savings will go to should you pass away. Designating a beneficiary ensures your savings go to the people you want. It also helps protect your heirs from the potential stress of dealing with probate proceedings through the courts.
Choosing your beneficiaries
There are two kinds of beneficiaries –primary and secondary (or contingent) beneficiaries. The person or entity that is elected as an account holder’s beneficiary can vary, but typically it’s a spouse, parent, sibling, friend, or even a trust or nonprofit organization.
- A primary beneficiary is the person or people your assets will transfer to in the event of your death. If you are married, your spouse must be your primary beneficiary, unless they sign a release in the presence of a notary. You can reach out to your plan recordkeeper or visit your retirement plan website to obtain a copy of this form.
- A secondary or contingent beneficiary is the person or people your assets will transfer to in the event of your death if your primary beneficiary is not alive at that time.
Special considerations when designating beneficiaries:
- If you have more than one primary or secondary beneficiary, you may designate a percentage of assets for each.
- You should review and update your beneficiary designations after major life events, like getting married, getting divorced, or having a child.
- Minor children should not be named as beneficiaries. Instead, you could designate a trust as beneficiary. With a trust, you can choose how you want assets to be managed and the circumstances under which they are distributed.
- Beneficiary designations are extremely powerful legal documents. They can even supersede a will!
How to designate your beneficiaries
The process of choosing your beneficiaries depends on the setup of your retirement plan. Your plan may allow you to designate your beneficiaries through your online account or by completing a paper beneficiary designation form.
We’re here to help
At BerganKDV, our Retirement Plan Solutions (RPS) team helps employers navigate the intricacies of maintaining a compliant retirement plan while maximizing participation and managing investment options. We empower our clients with informational resources and training so both employers and their employees feel confident they are getting the most out of their plans.
If you have questions about what our RPS team can do for your retirement plan, contact us today and one of our advisors would be happy to discuss it further. Let’s talk!
* Fidelity analysis of 18.9M active plan participants with a balance as of November 2021.
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