Why is it important that I name a beneficiary for my retirement account?

One of the most neglected aspects of retirement planning is the beneficiary designation.

What Is a Beneficiary—and Why Is a Beneficiary Designation so Important?

  • A beneficiary is the person or entity (such as a trust) whom you designate to receive the money in your retirement account in the event of your death.
  • Keeping your beneficiary information current is a good idea; it can help to ensure that your retirement benefits will be distributed according to your wishes upon your death.
  • If you die without having made a valid beneficiary designation, your retirement account will be distributed according to your retirement plan’s hierarchy for the payment of death benefits, or as stipulated by state law. Check your retirement plan documents or consult your legal advisor for more information.
  • Many financial professionals advise that individuals review/update their beneficiary information periodically—and especially following life changes, such as marriage, divorce, or the death of a loved one.

Making Your Beneficiary Designations Properly

  • You must make and file one valid beneficiary election for each retirement plan you participate in—even if you are a participant with more than one plan under the same plan provider.
  • If you are married and select someone other than your spouse as your beneficiary, your spouse will have to acknowledge that they are waiving their benefit and consent to the beneficiary designation by signing the beneficiary form in front of a notary public. You must then submit the notarized form to your retirement plan provider for processing.
  • Many people mistakenly assume that they will be provided for when a spouse/parent dies—or that their funds will take care of certain loved ones because of the provisions of their will. However, since wills do not cover company-sponsored retirement plans, even if your will does address your retirement accounts, the money from those accounts will be distributed according to the beneficiary information on file with your retirement plan provider(s).

For more information on how to designate a beneficiary, refer to your plan documents or call Prudential toll free at 1-877-PRU-2100, Monday through Friday, from 8 a.m. to 6 p.m., ET.

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