Choosing Beneficiaries for Your Retirement Accounts

Who you choose as a beneficiary of your retirement accounts, and how you designate each beneficiary, can have a significant impact on your family. Properly designating beneficiaries as part of your retirement planning process can help you contribute to the financial well-being of your heirs, giving them more options for how they receive the money and when those assets are taxed.

Different accounts have different rules

Many people saving for retirement have their assets in a mix of tax-advantaged retirement accounts, such as 401(k)s, 403(b)s and IRAs. While these accounts have many similar features, there are important distinctions.

One of the most critical differences involves spousal beneficiary rights. In a 401(k) plan, your spouse is considered your beneficiary unless they sign a waiver. This can get complicated if your spouse at the time of your death was not your spouse when you named your beneficiaries—you may not think of asking them if they are willing to sign a waiver after you are married. The beneficiary rules for IRAs are governed by state law or by the IRA document. Some states protect a spouse’s right to be a beneficiary while others do not.

Why is this important? Let’s look at an example. Suppose that after his divorce, a man names his children as beneficiaries on his IRA and his 401(k) accounts but neglects to change the beneficiary on his Roth IRA (leaving it as his ex-wife). A couple of years later, he remarries and then dies a short time later. His current wife receives the proceeds of his 401(k) because she did not sign a waiver. The assets in his IRA go to his children and his ex-wife is entitled to his Roth IRA unless state law or the IRA document says differently. But this may not be what the man intended. A situation such as this shows why it is important to conduct a full beneficiary review after any major life change such as a marriage, a divorce or the birth of a child.


What your beneficiaries do with your retirement account assets can be as important as what you do with the assets. You may want to include them in your planning.

Beneficiaries of all types of retirement accounts are subject to required distribution rules. It is important to understand these rules.

Your legal and tax advisors can help you designate beneficiaries for a retirement account so that your decision fits with your own financial and estate plan.

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Work With a Certified Professional

Rebekah J. Fero, CFP®, AIF®