Please ensure Javascript is enabled for purposes of website accessibility

Ask a Fool: How Do My Retirement Account Beneficiaries Work?

By Matthew Frankel, CFP® - Oct 4, 2019 at 12:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Here's what to know about your retirement plan's beneficiary form.

Q: On my 401(k) enrollment form I'm asked to name beneficiaries. What is the difference between a primary and contingent beneficiary? How should I list my children?

Nobody likes thinking of their own mortality, but it's a necessary part of smart estate planning. This is especially true when it comes to retirement accounts because they're likely to hold a substantial portion of your wealth in your latter years.

When you're choosing your retirement plan beneficiaries, there are a few things you should know. First, your primary beneficiaries are the people who would get the money in your account if you were to die if they are alive at the time. Contingent beneficiaries are who would get the money if your primary beneficiaries die before you do.

If you're married, it's worth noting that your spouse would legally inherit your retirement account even if you left the beneficiaries blank. In fact, if you want to name anyone other than your spouse as your primary beneficiary, your spouse needs to sign a written waiver.

For example, I have my wife named as my primary beneficiary on my retirement accounts. I have my two children listed as contingent beneficiaries in case my wife dies before I do.

Speaking of children, that's another key point. You can list a minor child as a beneficiary, but your money will need to be put into a trust until they reach the age of majority. A good alternative is to name a trustee (either an individual or financial institution) now and name your child's trust as a beneficiary, but consult a tax professional before doing this.

The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
402%
 
S&P 500 Returns
129%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.