You’ve probably been saving for retirement since you first got a job. You’ve putting a little bit away from every paycheck into a 401k or a Roth IRA since you’ve been working. You’re probably also pretty excited to get to use that money someday and benefit from your careful saving. If something happens to you before you fly-fish full time, you want to make sure that your family or loved ones can access the money you’ve been carefully saving. This is where adding beneficiaries comes in.
Who Are Beneficiaries?
Adding beneficiaries to a retirement account beyond yourself means that other people, beyond yourself, can benefit from your savings if you are not able to. This can mean descendants, your spouse, or a charity.
According to Fidelity, one of the largest retirement account managers in the U.S., you can add any person trust or entity as your beneficiary. This means that you can add a trust you’ve set up for yourself, or send the money directly to family members. If you use a Transfer on Death Account, you can even bypass the usual probate process.
What Happens if I Don’t Set a Beneficiary?
In some cases, the account agreements specify that a spouse or child automatically get the full sum in the account. In other cases, the funds default to your estate.
This means that the funds are then automatically diverted to your estate’s creditors before they go to your family. Not only that, but they must go through the probate process, often a lengthy one.
This is why you should always be sure to set a beneficiary. In some cases, you can even establish a secondary beneficiary, or split the benefits between several family members. Updating your beneficiaries regularly is a good way to ensure that the transition is as smooth as possible.
You should also remember to upload your account information to Jazmine.com, so friends and family can find it easily and quickly in an emergency.
How to Add or Remove a Beneficiary
Your retirement account management company should have an easy-to-find form called the “Beneficiary Designation Form.” You may have been given one when you first started your job, or you may have to hunt one down. You can also ask your company’s HR. Fill out the form, which is usually about a page long and send it in to the specified address.
A big headache and time saver is as easy as that!