All About 401k Beneficiaries

You work too hard to sock away money in your 401k plan to let the proceeds go to just anyone, right? You may want to make that your 401k assets go to the right people. One of the ways to do this is by checking your 401k plan forms and making sure that you have filled out everything properly. This will make sure that your assets transfer free and clear according to your wishes. In order to achieve this goal, you will need to take a look at 401k beneficiaries.

What Is a 401k Beneficiary?

A 401k beneficiary is the person that will inherit all of the assets in your 401k plan in the event of your death. There are a lot of things that need to be considered when selecting your beneficiary. You may want to consider tax consequences, the age of the beneficiary, and your marital status. You may also want to designate a certain percentage of assets that will be left to each of your beneficiaries. Beneficiaries also need to be changed in the event of divorce, death, or a change in living circumstances.

I personally have it pretty easy right now since I am married. 100% is set up to go to my husband. If he has passed away too, it is set to be split 50/50 between my sisters since my husband is an only child.

How to Designate a 401k Beneficiary?

Designating a beneficiary for your 401k is easy. You just need to fill in the name of the person that you would like to inherit your retirement plan assets on the beneficiary form. This could be a family member, friend, or anyone that you designate. Married individuals usually enter the name of their spouse as their legal beneficiary. If you are married and want to designate someone else as your beneficiary, you will need your spouse to sign a waiver or else they will inherit your assets as normal.

In order to make changes to a 401(k) plan’s beneficiary, you will need to contact your plan’s administrator to find out where the proper form is located for your plan. My company’s plan has the forms and information online, so it is very easy to change beneficiaries at will.

What are the Different Types Of 401k Beneficiaries?

401k plans allow you to designate primary beneficiaries and secondary beneficiaries. The primary beneficiary inherits the assets upon the death of the plan holder. A secondary beneficiary will inherit the plan holder’s assets in the event that the primary beneficiary dies prior to or at the same time as the 401k plan holder.

In short, like I mentioned above, my husband is my primary beneficiary and my sisters are my secondary beneficiaries.  All the plans I know if will allow you to designate whatever percentages you wish, so you are never forced to leave it all to just one person or entity.  I personally like this a lot since I would want to leave my remaining 401k assets to a variety of charities if my husband passes on before me and my sisters are all much older too.

What other key ideas can you think of for 401k beneficiaries? Have I missed any main points?

Written by Crystal

Crystal Stemberger uses Budgeting in the Fun Stuff to write about finding the balance between paying your bills, saving for your future, and budgeting in the fun stuff along the way.

4 Responses to All About 401k Beneficiaries

  1. One might also consider having an estate plan that includes a trust that could be named as the beneficiary of any retirement plan like a 401k. The trust document would then determine who benefits from the funds and could have several layers of remainder or secondary beneficiaries. Just something to think about.

  2. If make a trust (which benefit’s daughter) as a beneficiary of your 401K, will the entire 401k be required to be distributed and taxed?

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