Guest Post: Designating Your Retirement Accounts
This post comes from One Vote Matters host Maddy Martin as part of the b5mdia Business Channel’s April Scramble. Do you want to guest post on Biz Chicks Rule? E-mail your submission to Kristen.
While I do spend a good amount of time blogging about politics and other topics, in the “real world” I am an estate and tax planning attorney. I believe that one of the most forgotten, and yet important, matters facing all employees is the management of their retirement accounts.
The majority of business people have some sort of retirement savings account — whether it be through your job or a self-directed IRA. But we seldom think about the accounts unless we need to take a loan or are making a contribution.
Tax-deferred accounts, such as 401(k), 403(b), and standard (non-Roth) IRAs are designed to allow for voluntary retirement saving of “pre-tax” dollars. Contributions that are made, directly by employers or by the participant herself, can accrue and appreciate without income tax consequences until withdrawals are made.
Every scheme is governed by certain rules enacted by the US government; in addition, plans are also regulated by the companies and institutions that manage/administer them. You don’t have to be an expert at reading the regulations, but it is important to work with someone who is. Also, the fewer accounts that you have, the easier it will be to be sure that all of your retirement planning is in order.
401(k) accounts held with former employers can be “rolled” into regular IRA accounts. Generally, this is going to make the account(s) easier to manage and direct. Many companies have set investment plans for the accounts and each individual owns a portion of the whole, rather than being able to invest their individual share. Also, 401(k) accounts have stricter rules about naming (and changing) beneficiaries.
Which brings us to probably the most important issue regarding tax-deferred accounts for those under the age of 70 1/2 (the age at which you must begin mandatory withdrawals from your account): Designation of Beneficiary. The Designation of Beneficiary determines where (and sometimes how) an individual’s retirement accounts go when they pass away. It is this designation, and not one’s Will, that is controlling. Very often, retirement accounts are set up at the beginning of employment. The paper work is filled out and not thought of again. At the time you may have named a parent as your beneficiary, but you are now married and have children, but regardless, if the designation is not updated, the account will pass to the original designee. It is extremely important that you periodically review your Designations of Beneficiary, especially if you have a life-changing event, such as a marriage, birth of a child, or divorce. Updating your accounts can be particularly important after a divorce, because it may be that the divorce does not automatically negate the designation.
Each institution is going to have their own form and method for naming and changing beneficiaries. It can be confusing, so be sure to discuss the process with the administrators at your work and/or with independent counsel anytime you want or need to make changes.
Don’t forget to share What You Want to Be When You Grow Up and be entered to win a $25 Barnes & Noble gift card!
(photo via SXC.hu)
Tags: women and business, women in business, business advice for women, financial advice for women, investment advice for women, retirement savings, 401k, IRA, retirement account, maddy martin, planning for retirement, how do I plan for retirement, how do I save for retirement, madeline martin, biz chicks rule, kristen king
Related Stories
POSTED IN: Finances
0 opinions for Guest Post: Designating Your Retirement Accounts
No one has left a comment yet. You know what this means, right? You could be first!
Have an opinion? Leave a comment: