There are good reasons to make a record of your retirement accounts: After your death, your survivors will want to file claims for any outstanding benefits, and if you ever become incapacitated, the person in charge of your finances will have to manage those accounts for you. (For more on appointing someone to manage your finances if you can't, see Durable Financial Power of Attorney: How it Works.)
To make these tasks easier for your loved ones, you should keep a list of basic information about your retirement accounts, pension plans, and Social Security benefits. This article gives you tips on how to do that. First, however, here is a quick overview of what happens to retirement benefits after your death.
Each of your retirement accounts and pension plans should name a beneficiary. (Don't use your will to name beneficiaries for your retirement plans. For more on what not to include in your will, see What a Will Won't Do.) Money remaining in the accounts at your death (and any pension payments due to you) will pass directly to the beneficiaries you have named, without the hassles and expense of probate court.
For some plans, including 401(k)s and most pension plans, the law requires you to name your spouse as beneficiary unless he or she signs a form giving up that right. For IRAs and employer profit-sharing retirement plans, you may name any beneficiary you choose. (If you live in a community property state, however, keep in mind that your spouse has a legal right to half of the money that you earned during marriage. If you're married and you don't want to leave all your retirement benefits to your spouse, make sure you know the legal rules. (See If You Don't Want to Leave Retirement Accounts to Your Spouse.)
If you have created a living trust to avoid probate, it's generally not wise to name the trust as the beneficiary of your retirement accounts. Retirement funds are already exempt from probate, and by naming your trust as beneficiary, inheritors are likely to lose some of the benefits and flexibility they would otherwise have. For basic information about living trusts, see the Living Trust FAQ.
The rules regarding inherited retirement accounts can be complex. Spouses who have inherited a 401(k) or IRA have the most flexibility; they can "roll over" the account so that it becomes their own, subject to withdrawal rules based on their own age, or they can keep it under the deceased account owner's name. (See Naming Your Spouse to Inherit Retirement Accounts.) On the other hand, non-spouse beneficiaries usually must deplete the retirement account within 10 years of the account owner's death, but there are some exceptions. For a more in-depth discussion of these rules and recent changes to them, see How the SECURE Act Affects Your Retirement and Estate Plans.
After your death, your family may be entitled to Social Security survivor benefits. Eligible family members will receive monthly payments—as much as the full retirement amount that would have been paid to you.
Your surviving spouse qualifies for benefits if the spouse is:
Your unmarried children are entitled to survivor benefits if they are:
Other eligible survivors may include your dependent parents, divorced spouse, stepchildren, and grandchildren.
In addition to ongoing survivor benefits, your spouse or minor children may also be eligible for a one-time payment of $255 upon your death. For more information, see the Social Security website at www.ssa.gov.
It shouldn't take long to make a record of your retirement plans and accounts. Taking a little time to do it now may save your loved ones a good deal of trouble down the road.
At minimum, you should make a list of every plan that you have, whether or not it pays benefits now, or whether you expect benefits in the future. Remember to include:
For each account, list the following information:
You should also list and describe your Social Security benefits, including those based on your earnings (or disability) that go to your family members and those you expect in the future.
Remember to review your list of accounts and benefits periodically. Update your records if you acquire or terminate a plan or change the location where you file your plan statements.
Some of your retirement information is sensitive, so you'll want to file your list in a secure location, such as a locked cabinet or fireproof safe at home. But it's important to tell those closest to you where the information is and how to get to it. Most importantly, if you've named an executor, or an agent under a durable power of attorney for finances, be certain this person can find this information when they need it. For more information on getting your records organized and making them accessible to your loved ones after you die, see Practical Estate Planning: Organize Your Documents and Help Your Executor: Secured Places and Passwords. For more general information, see Getting Your Affairs in Order.
To help you organize retirement accounts and other important information, you can turn to Nolo's Get It Together: Organize Your Records So Your Family Won't Have To, by Melanie Cullen and Shae Irving. This workbook with CD-ROM provides a complete system for documenting information for your executor, caretakers, and other loved ones.