Leaving a legacy: Reviewing your beneficiaries

You work hard to build your retirement savings. Protect what you’ve built—make sure your savings are distributed according to your wishes if anything happens to you.

What is a beneficiary?

Beneficiaries are the people (or entities) who will receive your retirement funds should you pass away. Your accounts' beneficiary designation(s) are critical because they generally override all other estate documents, including wills.

"Retirement accounts are among most investors' largest assets," says Joe Swanson, a financial services representative for Principal® in Minnetonka, Minnesota. "You wouldn't take a chance on who inherits your home. Why would you do that with your retirement savings?"

Whom should you consider?

When naming your beneficiaries, keep these important points in mind:

Life changes, and so should your beneficiaries.

  • Divorced? Remarried? A birth or a death in the family? All of these life-changing events are likely to call for updates to your beneficiaries.

  • If you designate a charity to inherit your savings, check periodically to make sure it's still operating.

Default beneficiaries might not align with your wishes.

  • If you don't name a beneficiary, retirement funds in workplace retirement plans and IRAs generally go to your spouse—even if you meant to leave the money to someone else.

  • If you're single and don't name a beneficiary, your retirement funds could go directly to your estate, which means the courts would determine how they should be distributed. And that can be a long, expensive process.

Remember to designate a custodian for minor children.

  • If you name a minor (generally someone under 18) as your beneficiary, you'll need to designate a custodian to manage the money in this person's interest, should something happen to you.

  • If you don't, the state may decide for you, and the custodian could end up being someone you wouldn't have chosen.

Source: Principal Financial Services, Inc.

Life doesn’t always go according to plan. Hear a financial advisor talk about the importance of organizing your personal finances in one central location for your family in case of an emergency or death.