How to Pick a Beneficiary for Your 401(k)

fortpitt in 401(k) 13 December, 2021

Choosing a beneficiary for your 401(k) is an important decision. Learn more about how to select a beneficiary and what to do once you decide.

What Is a Beneficiary?

In the most simple form, a beneficiary receives money, estate, and other benefits from someone else, called the benefactor. In other words, you, the benefactor, would designate a beneficiary — or beneficiaries — to take over your 401(k) in the event of your death.

Consider whom to choose as your beneficiary or beneficiaries carefully and update it regularly — more on that below. Many people choose to name their surviving spouse or child as their beneficiary. Younger people might choose their parents.

Steps to Ensure Your Money Gets in the Right Hands

If you’re ready to choose your beneficiaries, follow these steps to ensure your 401(k) is handled the way you want.

1. Assign a Primary Beneficiary

Assigning a primary beneficiary to your 401(k) allows them to take ownership of these funds without your will, which can take more time to access. If you assign more than one primary beneficiary, you can choose to distribute your assets equally or specify what percentage you would like each beneficiary to receive.

2. Select Contingent Beneficiaries

Contingent or secondary beneficiaries inherit your assets if the primary beneficiary is no longer living. Like primary beneficiaries, you can assign one or many people as your contingent beneficiary. Be sure to specify how much of the assets go to each person.

3. Update Beneficiaries After Major Life Events

As your life evolves, you may get married, get divorced, or have kids. As you reach these milestones in your life, take the time to update your list of beneficiaries. If you die and your beneficiary is an ex-spouse or someone who has already passed away, your wishes may be disregarded. The beneficiaries you list on your 401(k) override even your will.

Also, remember to update all 401(k) accounts you might have from previous employers. You can choose to consolidate them or roll them into an IRA, too.

4. Tell Your Beneficiaries About Your Accounts

It is essential to inform all beneficiaries of any information they need to know to access your retirement account. For example, your beneficiaries should know the financial institution where your account is and whom they need to contact.

Let Fort Pitt Capital Help

If you have concerns about naming beneficiaries and managing your 401(k) account, Fort Pitt Capital can assist you. Learn more about our services online or by contacting us at 1-800-471-5827.

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