Tip: Check the contingent beneficiaries on your 401k

Minors … the legal way of talking about anyone who is under the age of majority … which in most states is the age of 18. Now, we’re only talking about “legal age,” we’re not talking about whether that age is indicative of responsibility. Do you remember what you were like at age 18? Crazy, right?

If you’re like most people who have a 401k offered through their job, you probably sat down with an HR rep and completed a bunch of forms when you were first hired. Sometime after that, you might have been contacted again to double-check your forms, but you haven’t given it much thought since then except to know that each paycheck has a percentage deducted and is automatically deposited into your company sponsored 401k account. Yay! Retirement is only 30 years in the future!

Among the forms that you completed was something called the “Beneficiary Designation” form. It might have even been a single line on a form.

You probably put your spouse or partner as your Primary Beneficiary – the person who will receive your 401k if you die before you get to use it.

If you later had kids, you might have added your kids to your 401k as a Contingent Beneficiary. At this time, you might have also learned what that means, which is the beneficiary who receives the 401k if the primary beneficiary – your spouse – dies before you do.

The truth of the matter is that minor children can’t be beneficiaries. They can’t receive an inheritance. They can’t get the payout from a life insurance policy. Moreover, they can’t collect your 401k.

People under the age of 18 aren’t considered to be of “legal age,” which means that your hard earned and save retirement account won’t get to the people that need it … your kids.

Call up your HR person and find out who is listed as the beneficiaries on your 401k. If you have anyone under the age of 18 recorded, you should change that beneficiary to a different person, a living trust, or designate custodial accounts.

Tip: Check the contingent beneficiaries on your 401k
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