Suze Orman talks about retirement

December 24, 2007 · Posted in Personal Finance, Retirement, Suze Orman

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I think Suze Orman is a little crazy. I just started watching her on a regular basis a couple of weeks ago, and I am surprised at her large fan base despite how arrogant and annoying she can be at times. There is almost a point during each episode where I am ready to turn off the tv, usually due to how annoyed I am, but also because I disagree with her opinion sometimes (there are times that I think she fails to get enough information about a person’s situation before dispensing her advice).

So why do I continue to go back? I have learned something new each time I have watched her show (3 times). For a 40 minute investment of my time (I use the DVR and cut out commercials), that’s not a bad return!

The last episode I watched had to do with retirement. My husband and I have been dragging our feet when it comes to a will - our excuse is that we are still not sure who we trust with our son if we were to both die. This is no reason to delay things, however, and I really want to take care of it soon after the new year. After watching the show, it really drove the point home.

What I learned from Ms. Orman was that the beneficiaries on 401(k) and IRAs override a will (I think that this is the case for life insurance as well, but I would need to check on that). After checking on our IRA beneficiaries, I found that I had not updated them since we got married (over 3 years ago)! I am not sure if having my husband listed as a beneficiary without formally naming him as my spouse would have been a problem, but leaving money to a deceased person would probably have caused an issue (which was the case for one of us).

Taking care of naming each other as primary beneficiaries was not a problem (Vanguard, for example, let us name beneficiaries online). However, we still need to name new secondary beneficiaries (ie. in the case that we both die). At the moment, we both have our son listed, but according to Fidelity.com (please check out the full article here):

Your beneficiaries can be individuals, charities, or trusts — but probably shouldn’t include minor children. “If you choose a minor as a beneficiary, most states will appoint a guardian, who must be bonded, and file very cumbersome accountings with the court each year until the child turns 18,” notes Modly (a financial advisor). “Then the courts hand over the money to the 18-year old, no questions asked, and wash their hands of the consequences.”

Eek! It looks like even though we don’t have a huge amount of assets, we need to seriously consider a trust. It seems like such a daunting task, but it really does need to be done, and soon.