Before you hire a retirement planner interview them to make sure they actually specialize in retirement planning so that they can properly advise you on all details of retirement accounts, big details as well as small details.
A good financial planner is not necessarily a good retirement planner. Not all financial planners may have the education or knowledge base to specialize in the details of retirement planning. There is a difference between a financial planner who focuses their practice on helping families save money for college planning and one who works with families saving money for retirement.
A good retirement planner should be telling you how to financially prepare for retirement plus how to maintain your retirement accounts – 401k account and Individual Retirement Accounts.
One very important detail that a good retirement planner would emphasize is account beneficiaries. There are a some very good practices that a retirement planner would advise you on implementing in regards to your 401k beneficiary. Let’s review those.
Is Your Retirement Planner Advising You On 401k Beneficiaries?
What is a 401k Beneficiary?
- A beneficiary is the person or persons you designate to receive the money in your 401k account if you die.
- There is a Primary Beneficiary and a Secondary or Contingent Beneficiary.
- A primary would receive the money from your account first. If the primary dies, the secondary or contingent beneficiary gets paid the money in the account.
- A primary can be one person who would receive 100% or it can be more than one person and they would split the account accordingly.
- You can have unlimited persons as beneficiary on your account.
- Be sure to always select a primary and a secondary.
Why is a 401k beneficiary important?
- Listing a 401k beneficiary on your 401k account is a detail that seems minor so is often overlooked and should not be.
- Having a designated beneficiary listed on your 401k account is almost as important as having your name spelled correctly.
- If you die without a designated 401k beneficiary listed, your account balance will not be distributed as you had wished; the people you wanted to benefit will not.
- Listing a beneficiary, gives you control.
- You have worked hard on building up your 401k investments; if something happens to you, make sure your money goes to who you want it to.
When should you select your 401k beneficiary?
- Complete the 401k beneficiary forms at the same time you are completing your 401k account enrollment application.
- Do not put off deciding who your 401k beneficiary will be.
- Do not leave the beneficiary portion of the enrollment forms blank.
- When completing enrollment forms many people can’t decide who to “pick” as the beneficiary so they leave it blank.
Will there be additional follow-up?
- You should check the 401k beneficiary listed on your 401k account on a regular basis.
- Your financial institution may accidentally change it.
- With computers today changes can accidentally be made to accounts without the knowledge of the employer or the 401k account provider or even you as an employee.
- Play it safe, make it a practice to check all retirement account beneficiaries on an annual basis.
Can you change your 401k beneficiary?
- As your life changes, your 401k beneficiary may need to change also.
- You can change your beneficiary as often as you need to.
- You just need to complete the proper forms, your 401k plan provider would have those forms.
- When you get married, you may want a different beneficiary than when you were single.
- After a divorce you may want a different beneficiary.
- If your beneficiaries dies, you will need to make a change.
Where to start:
Beneficiary selection is so important, be sure to check all of your accounts.
Ask your Human Resource department or your 401k plan sponsor for a copy of your beneficiaries, they do have that on file with your enrollment forms.
If you have no beneficiary listed, change that.
If you want to change who you have listed as the beneficiary, do it, don’t delay.
You should also follow the same practices with your Individual Retirement Accounts and life insurance policies.
Name your beneficiaries at the time you open up the account.
Check with the financial institution holding your accounts to see who you currently have listed as account beneficiary.
Yes, you can change your beneficiaries on your IRA’s and life insurance policies just like you can with your 401k account.