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What is a beneficiary and how should you choose one?

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MoMo Productions/Getty Images

Who are the beneficiaries on your 401(k) or IRA? How about your life insurance? If it’s been many years since you chose beneficiaries, maybe it’s time to take another look.

It’s easy to change your beneficiaries. As you think about your choices, here are some basic facts to be aware of, says Tom Hussian, an advanced markets consultant for Thrivent.

What is a beneficiary?

A beneficiary is “one who benefits,” according to the dictionary. In financial terms, your beneficiaries are the people or organizations that benefit when you leave money or other assets to them, such as a payout from your life insurance. Thrivent's bylaws, in Section 5, detail who can be designated as a beneficiary.

If I have a will, do I still need to have up-to-date beneficiaries?

The short answer is: Yes. “There are certain types of accounts—like IRAs or life insurance—that pass to named beneficiaries independent of what the will says,” Hussian explains. “You may say in your will, ‘I want my husband to get everything,’ but if your life insurance says your sister is beneficiary, that’s where [the insurance payout] is going.”

Are all beneficiaries treated the same way?

No, they are not. “Primary” beneficiaries are first in line. But if a primary beneficiary has died or declines the money, it will pass to a “contingent” beneficiary, if you’ve named one. For example, if “my primary beneficiary is my son, a contingent beneficiary might be another individual or a charity,” Hussian says. In that case, he adds, it’s important to let his son know that he’ll have the option of turning down the money that’s been left to him—which his son might want to do for tax or other reasons—and to tell his son who the money will pass to next.

What should I think about when choosing beneficiaries?

Generally, the SECURE Act requires beneficiaries to empty any retirement accounts that you’ve left to most non-spouse beneficiaries within 10 years. In some circumstances, non-spouse beneficiaries may be subject to annual distributions over this 10-year period. You can help your beneficiaries minimize their tax bill by moving some retirement funds into other vehicles, such as life insurance or a Roth IRA. While Thrivent does not provide specific legal or tax advice, we can partner with you and your tax professional or attorney.

Ready to make a beneficiary change?

Thrivent’s beneficiary designation forms are available to download at