The first thing that every person who has a retirement plan should understand is that all retirement plans go to a named beneficiary. In other words, whoever you put on that document when you first set that plan up is solely entitled to receive those funds. Sound like a big decision? It is.
For starters, if you have a 401K you should go to your HR department and make sure that your beneficiary is current and up to date with all the proper information. If your IRA is held at a brokerage company, you should call them and make sure that their beneficiary form is suitable to you.
The more important question we want to focus on though is exactly what happens to your retirement funds if, (knock on wood), you’ve “kicked the bucket?” That is, if you “expire” before you retire, what happens to the person as they receive that money?
It is much easier to understand with an example:
Let’s say, you are married but you have recently passed away; leaving your wife a widow as well as the beneficiary to all of your retirement funds. Well, your wife is going to be faced with the find that she has the same restrictions on that retirement money as you do. In other words, those funds are not available to her until she reaches the qualifying age of fifty nine and a half. Unfortunately, if you have deceased way before expected, relying on those retirement funds as a source of income for your wife will not be applicable.
The good news is that here at Barber & Associates, we help people with a variety of different retirement plans that are not burned with the tax rules other types of plans out there enforce. Many of these plans offer the option of transferring all of your retirement monies, completely tax free! These same plans grant you with death benefits that are unrestricted, so that your beneficiaries have immediate access and control of that money. One of the things we specialize here at Barber & Associates Financial Group is determining what the most effective retirement plan is for you and for your loved ones.