What Happens If There's No Beneficiary Named on My Retirement Account?

Naming a beneficiary (or co-beneficiaries) to your retirement account may feel like small potatoes, a minor administrative task. However, failing to ensure a beneficiary is named can lead to significant complications for the people you love following your death. Here's a breakdown of what happens if beneficiaries are not up to date.

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The type of account matters

401(k)s and other employer-sponsored plans

Let's say you're self-employed and have a Solo 401(k), or work for a company that offers a retirement plan, such as a traditional 401(k) or 403(b) plan. When you die, what happens to that retirement account depends largely on whether you have named designated beneficiaries. If so, the plan is transferred to the person (or persons) you've named without having to go through probate.

Probate is the legal process for settling a deceased person's estate. During this process, the will is validated, outstanding debts paid, and remaining assets transferred to heirs. If it's an uncomplicated probate, the entire process should take between three and six months. However, it can take longer, and if that's money your beneficiaries are counting on, they could find themselves in a financial pickle.

In addition, probate can be costly, with filing fees, legal fees, and other expenses totaling 3% to 7% of the total value of your estate.

Traditional and Roth IRAs

If you die without a named beneficiary, the custodian of a traditional or Roth IRA will check its account agreement. If you don't have a living beneficiary on record, a default beneficiary hierarchy kicks in. The typical default order names the surviving spouse first. If there is no spouse, some custodians will include children and other relatives in the beneficiary chain, but many do not, and the IRA goes directly to your estate.

Once it's included in the estate, the IRA triggers a five-year payout period rather than the 10-year rule available to named beneficiaries. In other words, the IRA must be entirely liquidated within five years.

As part of your estate, the IRA is also subject to potential creditor claims, and the five-year payout period means the tax bill is more significant than it would be with a 10-year payout period. Because the federal estate tax exemption for 2026 is $15 million, most families won't owe estate tax, but a forced five-year liquidation can still hit them with a larger-than-expected tax bill.

How to ensure your beneficiaries are up to date

There's no harm in setting aside a day each year to check your beneficiaries and ensure they're up to date. For example, if you've recently gotten divorced, you'll probably want to remove your ex-spouse as a beneficiary and replace them with someone else. The process of checking and updating involves only two steps:

1. Gather all your retirement accounts.
2. If you haven't named a beneficiary or want to change the beneficiary on an account, contact the plan administrator or custodian to request a beneficiary designation form.

And don't forget, you can do it your way. For example, you can name both a primary and a contingent beneficiary who will inherit the account if the primary beneficiary can't receive assets. If you'd rather, you can name multiple beneficiaries to a single retirement account.

Naming beneficiaries is the easiest way to make sure your loved ones receive your retirement account with the least hassle possible.

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