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A podcast designed to help retirees and those nearing retirement navigate finances and life planning with expert insights from financial advisor Trevor Lawson. Tune in for practical strategies and inspiring ideas to ensure your retirement years are purposeful, fulfilling, and truly your best chapter yet.
*Securities and investment advisory services offered through Osaic Wealth, Inc. member FINRA/SIPC. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth. Branch phone: 919-546-0400.
Trevor Lawson: [00:00:00] Welcome to The Retirement With and On Purpose Podcast. I'm your host, Trevor Lawson, and this show is all about helping you not just reach retirement. But truly thrive in it. You've put in the work. Now let's make sure you can enjoy every moment to the fullest.
Welcome back to what would be Considered a follow-up episode. To last, uh, the last episode on 4 0 1 Ks. Last time around we talked all about the 401k and what our options are for our 401k upon retirement. Today is all about what happens to our 401k when we pass away. And I'll be referencing an article from Fidelity that I'll reference in the show notes that really spells out your options with your 401k when you pass away.
So in general, I. When you die, your 401k or [00:01:00] Roth 401k generally passes to the beneficiaries listed on your plan. So, um, it's very important to make sure A, that you've got a beneficiary listed, but b, that you, that's who in fact you want your 401k to go to if you, if you do pass away. These are people you've told.
Your plan administrator should receive the assets in your account upon your death, provided you've named beneficiaries. This process takes place outside of what's called probate. That's the biggest reason for listening a beneficiary on your 401k. If you do that, the asset can avoid probate, which is the potentially lengthy legal process that reviews and transfers your assets to those you intended.
This comes with many important caveats, however. A couple things here. You may designate multiple primary beneficiaries on your 401k, so you must allocate a percentage of the account to each beneficiary so that all percentages add up to a hundred percent, but you can. You can list as many beneficiaries as you want and kind of [00:02:00] divvy up that a hundred percent across multiple beneficiaries.
Secondly, if you do not designate a beneficiary, your spouse automatically inherits your 401k upon your death. So if you don't designate a beneficiary, your spouse will inherit your 401k beneficiaries named in your plan. Inherit your 401k, even if you stipulate other people receive it in your will. That's important for us to, to kind of that important point for us to drive home.
So let's just say, you know, you've got your brother listed as your beneficiary on your 401k, but in your will you say, Hey, I'd like my. Investment proceeds to be split evenly amongst my children when I'm gone. Well, your 401k will go direct to the beneficiary listed, and it would override your will in that example.
So again, make sure that the beneficiary enlist on your 401k is who, in fact you want those monies to go to. You may [00:03:00] name what are called contingent beneficiaries to receive funds if your primary beneficiary dies. Before you do, if you don't, depending on your plan, your 401k becomes a part of your estate and will go through probate with the rest of your possessions.
So unfortunately, I'm going through this now, um, with another, another client who, whose beneficiary passed away, and then while we were working to update. His beneficiaries, unfortunately, um, an untimely death occurred for him. And so the 401k is, is, you know, having to go through the probate process. So it's very important to not only make sure you've got your beneficiaries set up the way you want, but also to really think about listing a contingent beneficiary if you're.
First beneficiary passes away. Before you do, who do you want to be next in line to receive your 401k benefits? Similarly, if you aren't married and haven't designated a [00:04:00] beneficiary, your 401k may become part of your estate and goes through probate. Again, probate, we just wanna, we wanna try to avoid that at all cost.
It's, it's time consuming, it's public information so people are gonna know what was in your account and it's, it's very lengthy, um, and puts a lot of, a lot of. A, a, a big burden on your, the executor of your estate. So if possible, make sure you keep your 401k beneficiary updated, um, and, and review that periodically.
Inevitably, life changes, sometimes divorce happens. Sometimes our beneficiaries pass away. Before we do, just keep your beneficiaries up to date on your 401k and you can alleviate a lot of headache, not only for you, but certainly your beneficiaries. As time goes on. As always, I appreciate you tuning in. I hope you found this episode enlightening and help you think through areas related to your financial life that that can certainly benefit you and your heirs.
And until next time, stay well and I look forward to being with you again [00:05:00] soon. Take care.
Care. Thanks for tuning in to The Retirement With and on Purpose podcast. I hope you're walking away with new ideas. And a fresh perspective on how to make the most of your retirement journey. And remember, retirement isn't the end. It's your time to live with purpose. Until next time, I'm Trevor Lawson.
Here's to a fulfilling and thriving retirement.