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Who should get your retirement money?

I had an interesting conversation with a friend a few days ago, and got her permission to discuss it here. She is engaged and I was very pleased to hear that she and her future husband have been discussing how they plan to deal with their finances after they wed. I am not sure of all of the details, just that they seem to have agreed on all but one minor thing – their retirement accounts.

Right now, my friend has her retirement accounts (401k and Roth IRA) set up so that if she dies, the money in the account is distributed equally among her three siblings. As a single woman with no children, I have done the exact same thing with my accounts. While discussing these accounts with her betrothed, she commented that until they have children, or at least until the situations change, she would like to keep it that way.

Clearly, since I’m writing about this, you already know that he did not agree. In his opinion, they should each make the other the beneficiary of these accounts. He did make some good points, one being that changing things now would prevent forgetting to change them later after a child is born.

In her opinion, for the next few years at least, her siblings would benefit the most from the money. Her siblings are in college and high school, while her to-be husband has a good job and a retirement account of his own. Additionally, as they agreed, everything else she owns would go to him in her will (aside from some family heirlooms he has no desire to keep).

I am not sure how they resolved the matter. It wasn’t a huge sticking point between them, she was just surprised that he reacted so strongly to the matter. Additionally, at this point, they’re not talking a huge amount of money. She’s only been in the workforce a few years, and over the past year, her retirement accounts have taken a hit thanks to market fluctuations.

I did think it was an interesting debate. Were I getting married and having this discussion, I don’t know what I would do. As I said, I also have my retirement accounts set up so that my siblings are the beneficiaries, and I know that one of my siblings has done the same (the other is still a college student who I cannot convince to start a Roth IRA).

Anyone want to weigh in?

8 comments to Who should get your retirement money?

  • That is an interesting discussion. I am 36, never married and no kids, so I have made my niece and nephew the beneficiaries of my accounts. My brother and his wife are doing fine financially, so I think it would help the kids out for college or getting started in the real world if they needed it.

  • I made my DH my beneficiary as soon as we were married.

  • karla (threadbndr)

    I may be old fashioned, but I think that once you are married, you should be each other’s beneficiary. At that point, you go from being two households (even if you are already under one roof) to one.

    I think it may be a generational thing, though. My son told me he would change his designations to half me (he’s an only child) and half his (future) wife until they had kids. That rather took me aback, actually, as I had expected him to put her on everything right away.

  • Slinky

    I’ve just graduated and started at work so I recently went through this debate. I am only engaged, and my fiancee does have some retirement savings of his own. While my mother(divorced) is not well off and has none. She will be relying on social security, and hopefully half my father’s pension and a small rental property. My brother could also likely benefit from the money, but I’m more worried about my mother and he would get it in the event of all three of us going.

    I thought long and hard about who should go first or if we should go half and half or what. In the end, my fiancee went on first and my mother as secondary. Why? For a few reasons. I promised my fiancee I would help him accomplish certain goals. I want to keep that promise even if something happens to me. I also know that he would help take care of my mother if she needed it. She also has my brother and her own boyfriend (or whatever you want to call it when an older couple move in together with no intention to marry).

    In any case, I agree that need and peace of mind should play the biggest role in the decision. Just like any other money, put it where it does the most good and brings you the most happiness.

  • Tina

    I feel odd commenting on a post from over a year ago, but I was poking through your site for the first time and can’t resist.

    It may not matter who your friend wants to be the beneficiary of her 401k if it is an ERISA 401k – unless her spouse signs a waiver, it will automatically go to him as the surviving spouse. Non ERISA plans like the IRA can still be assigned to other beneficiaries I believe. Hope everything worked out for her!

  • That is very insightful. It presented me a number of ideas and I’ll be placing them on my website eventually. I’m bookmarking your website and I’ll be back. Thank you again!

  • Red

    Hmm… I agree with your friend’s point of view. At least until her siblings are out of school and have been in the workforce for a few years, it makes more sense to keep them on as beneficiaries. Heck, my husband has his brother listed as one of two beneficiaries of his life insurance policy (I’m the other, of course.), and I think it’s a nice thing to do as his youngest brother has some money issues and will be bringing home a baby in the next couple months. Until we have massive debt together (a mortgage, if we don’t pay with cash or just rent forever), I don’t see the need to even have a life insurance policy. Regardless, I think your friend is doing right by looking out for her siblings AND her soon-to-be husband.

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