Why should I add beneficiaries to my retirement account?

A beneficiary is a person or entity designated to receive the benefits or assets of an account or asset after the death of the account holder or asset owner. A beneficiary can be named on a variety of financial accounts, including life insurance policies, retirement accounts (such as IRAs and 401(k)s), and investment accounts, as well as on assets such as real estate and personal property.

When the account holder or asset owner dies, the assets in the account or the asset will be distributed to the designated beneficiaries, either according to the terms of the account or asset or according to the terms of a will or trust. The designation of a beneficiary is an important aspect of estate planning, as it helps ensure that the assets are distributed according to the wishes of the account holder or asset owner.

It is important to regularly review and update your beneficiary designations to ensure that they align with your current wishes, especially if you experience a major life event such as a marriage, divorce, or birth of a child. Failing to update your beneficiary designations can result in unintended consequences, such as assets being distributed to an ex-spouse or an estranged relative instead of to your intended beneficiaries.

There are several reasons why you should consider adding beneficiaries to your retirement account:

1. Avoid Probate: Probate is the legal process of distributing a person’s assets after they pass away. By adding beneficiaries to your retirement account, you can avoid probate and ensure that your assets are distributed directly to your designated beneficiaries without the need for court involvement.
2. Faster Distribution: When you add beneficiaries to your retirement account, the assets in the account will be distributed directly to the beneficiaries upon your death. This can be faster and more efficient than the probate process, which can take several months or even years.
3. Increased Control: When you add beneficiaries to your retirement account, you have increased control over who will receive your assets and in what proportions. This can be especially important if you want to provide for specific individuals or causes after you pass away.
4. Tax Advantages: Retirement accounts such as IRAs and 401(k)s often have tax advantages, and adding beneficiaries can help ensure that these benefits are passed on to your designated beneficiaries. For example, if you have a traditional IRA, the assets in the account can grow tax-deferred, and your beneficiaries can potentially stretch out the distributions over their lifetimes, which can help minimize their tax liability.

At Johnson Financial Advisors, we understand the importance of proper beneficiary designations and estate planning. Our team of experienced financial planners can help you navigate the complex process of designating beneficiaries and ensuring that your assets are distributed according to your wishes.

Whether you need to update your existing beneficiary designations or create a new estate plan*, our team can help. We will work with you to understand your goals and help you* make informed decisions about who should receive your assets after you pass away. Our goal is to help you ensure that your assets are distributed according to your wishes while minimizing the potential for unintended consequences and maximizing the benefits for your intended beneficiaries.

Don’t leave your financial future to chance. Contact Johnson Financial Advisors today to schedule a consultation and start planning for your financial future. Our team of experienced financial planners is here to help.

*Johnson Financial Advisors does not provide legal advice. Please contact your attorney for legal guidance.