One of the most important — and most often overlooked — steps when you enroll in a 401(k) is setting your beneficiary. It may not feel urgent, but keeping this information up to date helps ensure your retirement savings are distributed according to your wishes if something happens to you. Luckily, setting or updating your beneficiaries is usually quick and straightforward.
What is a beneficiary?
A beneficiary is the person (or people) you designate to receive the assets in your retirement account after your death. You can name:
- A spouse
- Children or other family members
- A friend
- A trust
- A charitable organization (if permitted by your plan)
You may also be able to name primary beneficiaries, who receive the assets first, and contingent beneficiaries, who receive them if a primary is unable to.
Why is naming a beneficiary important?
Without a valid beneficiary designation, the distribution of your account will be determined by your plan’s rules or applicable laws — which might not reflect your intentions. Keeping the information current helps:
- Ensure your savings go to the people you choose
- Simplify the distribution process for your loved ones
- Reduce the potential for delays or disputes
- Give you peace of mind knowing your wishes are documented
When should you review your beneficiaries?
It’s a good idea to reassess your designations after a major life event, such as:
- Marriage or divorce
- Having or adopting a child
- The death of a current beneficiary
- A significant change in your estate-planning goals
Even if nothing has changed, reviewing your beneficiaries every couple of years helps make sure your information stays accurate.
How do you update your beneficiaries?
Most plans let you update beneficiaries through your provider’s online portal or by completing a beneficiary designation form. The process typically takes only a few minutes, but it’s an important part of maintaining your account.
The bottom line
Naming a beneficiary is one of the simplest steps you can take to protect your retirement savings and make sure the money goes where you want it to. If you’re unsure who you’ve designated — or it’s been a while since you checked — log into your account or contact your plan provider to review and update your information.
This article is for general educational purposes only and is not tax, legal, or investment advice. Consider your own situation and consult a qualified professional before making decisions about your retirement account.