Beneficiary vs. Joint Owner: Which Is Best for Your Investment Account?

Admin • September 29, 2023

An aspect of financial planning that many of us might not relish discussing is preparing for the unexpected. One of the many decisions you will face is determining the best way to pass on your investment accounts to your children when you die. 

Should your children be beneficiaries or joint owners of your investment accounts? Is it wiser to look at other options, like using a will? What is the best approach? Ultimately, we aim to help you make a practical and thoughtful decision that best serves your family’s financial future.

Beneficiary Designation vs. Joint Ownership vs. Will: What’s the Difference?

Before we look into the pros and cons of each option, it’s crucial to understand the differences between having your children as beneficiaries, or joint owners, or designating them in your will.

  • Beneficiary designation: When you name someone as a beneficiary on your investment accounts, they directly inherit those assets upon your passing, bypassing probate.
  • Joint ownership: You and your children share ownership of the investment accounts while you’re alive. In the event of your passing, ownership automatically transfers to your children, avoiding probate.
  • Will: A will outlines your wishes regarding asset distribution after your death. Assets distributed through a will typically go through probate, which can be lengthy and costly.

Now that we’ve clarified the terms let’s explore the pros and cons of having your children as beneficiaries or joint owners on your investment accounts.

Pros of Children as Beneficiaries on Investment Accounts

Not all investment accounts allow you to name beneficiaries. The ability to designate beneficiaries on an investment account depends on the type of account and the policies of the financial institution or brokerage firm that holds the account. 

Typically, retirement accounts such as IRAs and 401(k)s allow you to name beneficiaries. Brokerage accounts don’t automatically include beneficiary designations; however, you can usually designate your children as beneficiaries on your investment account through a Transfer on Death (TOD) designation. This legal arrangement allows you to select a specific individual or individuals who will automatically inherit the assets held in the account upon your death. 

The benefits of adding your children as beneficiaries to your accounts can include:

  1. Quick access to funds: One of the most significant advantages of designating your children as beneficiaries is that they can access the funds immediately upon your passing. This is crucial for covering immediate expenses like funeral costs, medical bills, or mortgage payments.
  2. Avoiding probate: Beneficiaries bypass the probate process, so your children won’t have to navigate time-consuming and potentially costly court proceedings. They can receive their inheritance swiftly.
  3. Privacy: Beneficiary designations are generally private and don’t become public records, ensuring your financial matters remain confidential.
  4. Revocable and changeable: You can typically change or revoke your beneficiaries at any time. This flexibility allows you to adapt the designation to changes in your life circumstances or financial plans.
  5. No impact on current ownership: You continue to control the account. You can continue to use, manage, and make changes to the account as you see fit.  

Beneficiaries can help ensure that your assets are distributed according to your wishes. It’s important to note that state laws govern TOD designations, and the specific rules and requirements may vary depending on where you live. It’s a good idea to consult with your legal or financial professional, who can provide personalized advice.

Cons of Children as Beneficiaries on Investment Accounts

Let’s look into some potential drawbacks of designating your children as beneficiaries. While this approach offers certain advantages, it’s essential to consider the limitations and complications that may arise. Understanding these drawbacks will help you make an informed decision that best suits your family’s financial future.

Potential drawbacks can include:

  1. Minors as beneficiaries : Generally, investment accounts cannot transfer directly to your minor children when you die. If you have not designated a trustee through your will or living trust, the courts will name a conservator until your child reaches the age of majority (18 or 21, depending on the state).
  2. Financial impact on beneficiaries : Even if your child is of legal age, they may not be mature enough to handle a large influx of money. Once you pass, your beneficiary has complete control of the asset. Even if you place instructions in your will indicating how you want the beneficiary to handle the account, your instructions don’t need to be followed. The beneficiary designation supersedes the will , and the beneficiary can do what they want.
  3. Tax implications : There could be tax implications when your beneficiary inherits the account. You’ll want to seek guidance from your financial advisor or tax professional.

If your children are responsible adults who can handle their finances wisely, designating them as beneficiaries can be a straightforward and practical choice. However, you may want to consider other options if they are minors or not financially savvy.

If you choose to name your children as a beneficiary on your account(s), keeping a few things in mind is essential. You should regularly review and update your beneficiaries. Life changes happen—for example, the birth or death of a child. Consider adding a contingent beneficiary in the event something happens to the primary beneficiary. If you have multiple investment accounts, be sure to review every account.

Pros of Children as Joint Owners of Investment Accounts

When you add your children to your investment accounts, they have equal ownership. Once you pass away, the account passes directly to the joint owner(s). Having your children as joint owners of your investment accounts has some similar advantages to naming your children as beneficiaries:

  1. Immediate access and control : Joint ownership gives your children quick access to the accounts and total control of the assets upon your death. They can manage and use the funds as needed without delay.
  2. Avoids probate : Like beneficiary designations, joint ownership bypasses the probate process, saving time and money for your heirs.
  3. Simplified management : If you become incapacitated, joint owners can assist in managing the accounts and make financial decisions on your behalf, ensuring your finances are taken care of.

Cons of Children as Joint Owners of Investment Accounts

Having your children as joint owners of your accounts can raise many complex questions, particularly if you have more than one child. Some of the drawbacks to having your children as joint owners include:

  1. Shared responsibility : Your children have equal responsibility for the accounts while you’re alive. This may create complexities if they have different financial goals or disagree on how to manage the assets. Who will claim the income or capital gains on the account? If you have multiple children, will they all be added as joint owners? There are many factors to be considered if you choose this option.
  2. Potential creditor issues : If your children face financial difficulties or legal troubles, their creditors may have claims on the jointly owned accounts, putting your assets at risk. In addition, if a married child gets divorced, the ex-spouse could also have a legal claim to a portion of the account.

While having your children as joint owners can have its merits, it brings a host of intricate issues to consider. This option typically works if you only have one child and want everything to quickly pass to your child after your death. But even then, you must consider whether the benefits outweigh the potential drawbacks.

Investment Account Beneficiary vs. Will

Choosing between designating investment account beneficiaries and relying on a will is a pivotal decision in estate planning. Each approach has its unique strengths and considerations, and understanding these can help you chart a course that aligns best with your financial vision.

When you name beneficiaries on your investment accounts, you are essentially creating a direct pathway for the transfer of assets upon your passing. This streamlined process bypasses the often lengthy and costly probate system, ensuring your beneficiaries receive their inheritance promptly. Beneficiary designations offer privacy, as they typically remain outside the public domain. 

Conversely, a will serves as a comprehensive blueprint for the distribution of your assets after your passing. It allows you to specify not only who receives what but also who will oversee the execution of your wishes as the executor. The benefit of a will is that it allows for a more nuanced estate plan, accommodating diverse family dynamics and addressing specific bequests. However, the trade-off is that wills are subject to probate and are public documents, potentially exposing your financial matters to public scrutiny. 

Therefore, the decision between beneficiary designations and a will hinges on your preferences for efficiency, privacy, flexibility, and the level of complexity you wish to impart to your estate plan.

Five Pines Wealth Can Help You Determine Your Best Path

There are many factors to consider when determining how to pass on your investment accounts to your children. The conversation is part of responsible financial planning, and the choices can significantly impact your family’s future. 

At Five Pine Wealth Management , we understand these choices can be challenging. Our estate planning and financial management expertise can provide the guidance you need to create an effective strategy that aligns with your circumstances and goals. We’d love to meet with you to see how we can help you pass on your investments to your children. Give us a call at 877.333.1015 or send us an email at info@fivepinewealth.com .

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You've Maxed Your 401(k). Now What? A Strategic Guide for High Earners

January 26, 2026
Key Takeaways High earners maxing out 401(k)s at $24,500 are only saving about 8% of a $300,000 income in their primary retirement account. The mega backdoor Roth strategy can increase total 401(k) contributions to $72,000 annually with tax-free growth. A comprehensive approach can create nearly $3 million in additional retirement wealth over 20 years. It's 2026. You're checking all the boxes. You're earning upwards of $300,000 annually, and you're maxing out your 401(k) every year. You've reached the $24,500 contribution limit and feel confident about securing your financial future. Then you realize $24,500 represents less than 8% of your income. Over 20 years, this gap adds up to millions in lost opportunity. Thankfully, you're not stuck with the basic 401(k) playbook. There are sophisticated strategies beyond your contribution limit. 5 Strategic Moves for High Earners with Maxed-Out 401(k)s Here are five sophisticated strategies that can help you build wealth beyond your basic 401(k) contributions. All projections assume a 7% average annual return and are estimates for illustrative purposes. 1. Mega Backdoor Roth Contributions If your employer's 401(k) plan allows after-tax contributions, this could be your biggest opportunity. With employee contributions, employer match, and after-tax contributions, the combined 401(k) limit for 2026 is $72,000 ($80,000 if you're 50 or older). The mega backdoor Roth works because you immediately convert those after-tax contributions into a Roth account, where they grow tax-free forever. The catch: Not all employers offer this option. You need a plan that permits after-tax contributions and in-service Roth conversions. The impact: The available space for after-tax contributions depends on your employer match. With a typical employer match of 3-6% (roughly $10,000-$21,000 on a $350,000 salary), you could contribute approximately $26,500-$37,000 annually. At 7% average returns over 20 years, this creates approximately $1.1-$1.5 million in additional tax-free retirement savings. 2. Donor-Advised Funds for Charitable Giving If you're charitably inclined, donor-advised funds (DAFs) offer a way to bunch several years of charitable contributions into one tax year, maximizing your itemized deductions while still spreading your giving over time. You get an immediate tax deduction for the full contribution, but you can recommend grants to charities over many years. The funds grow tax-free in the meantime. The catch: Once you contribute to a DAF, the money is irrevocably committed to charity. You can't get it back for personal use. The impact: Contributing $50,000 to a DAF in a high-income year (versus giving $10,000 annually) can create immediate federal tax savings of $15,000-$18,500 while still allowing you to support the same charities over five years. 3. Taxable Brokerage Accounts with Tax-Loss Harvesting Once you've maximized tax-advantaged accounts, strategic taxable investing becomes your next move. The key is working with a financial advisor who implements systematic tax-loss harvesting throughout the year. Tax-loss harvesting involves selling investments at a loss to offset capital gains elsewhere. Done strategically, this can save thousands in taxes annually. The catch: Long-term capital gain rates (0%, 15%, or 20%) are lower than ordinary income tax rates, but you're still paying taxes on gains. It's less tax-efficient than retirement accounts, but far better than ignoring tax optimization. The impact: For high earners in the 35-37% ordinary income brackets, the difference between long-term capital gains (20%) and ordinary rates is significant. Effective tax-loss harvesting on $50,000 in annual gains over 20 years could save $150,000+ in taxes. 4. Health Savings Account (HSA) Triple Tax Advantage HSAs offer a unique triple tax benefit: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. With 2026 contribution limits of $4,400 for individuals and $8,750 for families, this adds another powerful layer to your strategy. You can invest HSA funds just like an IRA and let them grow for decades. After age 65, you can withdraw the funds for any purpose, medical or otherwise. The catch: You must have a high-deductible health plan to qualify for an HSA. After age 65, non-medical withdrawals are taxed as ordinary income (like traditional IRA distributions), but you still benefit from the upfront deduction and decades of tax-free growth. The impact: Contributing the family maximum ($8,750) annually for 20 years at a 7% average annual return creates approximately $355,000-$360,000 in tax-advantaged savings. 5. Backdoor Roth IRA Contributions Not to be confused with mega backdoor Roth contributions! Even if your income exceeds the Roth IRA contribution limits, you can still fund a Roth through the backdoor method: make a non-deductible contribution to a traditional IRA, then immediately convert it to a Roth IRA. The catch: If you have existing traditional IRA balances, the pro-rata rule complicates things. You may want to consider rolling those funds into your 401(k) first if your plan allows. The impact: Contributing $7,000 annually through the backdoor Roth for 20 years at 7% average annual return creates approximately $285,000-$290,000 in tax-free retirement savings. What Compounding These Strategies Looks Like Over 20 Years Let’s look at approximate outcomes based on a 7% average annual return. 401(k) Only: Annual contribution: $24,500 Total after 20 years: ~$1M 401(k) + Mega Backdoor Roth: Annual contribution: $72,000 Total after 20 years: ~$3M Note: Mega backdoor Roth space varies based on your employer's match. These calculations assume you're maximizing the total annual limit. Comprehensive Approach (under age 50): Mega Backdoor Roth: ~$3.0M HSA: ~$350K-$360K Backdoor Roth IRA: ~$285K-$290K Strategic taxable investing with tax-loss harvesting Total retirement savings: ~$3.6M+, plus taxable investments Comprehensive Approach (ages 50-59): With higher contribution limits and catch-up contributions, total retirement savings can reach ~$4M+ over 20 years. Comprehensive Approach (ages 60–63 with enhanced catch-up contributions) Higher contribution limits during peak earning years allow for meaningful acceleration of retirement savings. The exact impact depends on timing, contribution duration, and existing balances. The Bottom Line The difference between stopping at your basic 401(k) and implementing a comprehensive strategy can approach $3 million or more in additional retirement wealth over time. Why Strategic Coordination Matters These aren't either/or decisions. The most effective approach coordinates multiple strategies while ensuring everything works together. At Five Pine Wealth Management , we help high-earning clients build comprehensive plans that go beyond the 401(k). We coordinate your employer benefits, tax strategies, and investment accounts to create a cohesive approach that maximizes your wealth-building potential. This requires working across several areas: Analyzing your employer's 401(k) plan for mega backdoor Roth opportunities Implementing systematic tax-loss harvesting in taxable accounts Coordinating Roth conversions and backdoor contributions Optimizing your HSA as a long-term retirement vehicle Ensuring charitable giving strategies align with your tax situation Maximizing catch-up contributions when you reach milestone ages As fiduciary advisors, we're legally obligated to act in your best interest. That means we're focused on strategies that serve your goals, not products that generate commissions. Ready to see what's possible beyond your 401(k)? Email us at info@fivepinewealth.com or call 877.333.1015 to schedule a conversation about your specific situation. Frequently Asked Questions (FAQs) Q: Does my employer's 401(k) plan automatically allow mega backdoor Roth contributions? A: No. You need a plan that permits after-tax contributions and in-service conversions to Roth. Check with your HR department. Q: How do I prioritize which investment strategies to use? A: Generally, maximize employer match first (it's free money), then fully fund your 401(k), explore Mega Backdoor Roth if available, max out your HSA, consider backdoor Roth IRA contributions, and then move to taxable accounts with tax-loss harvesting. We can help determine the right sequence for your circumstances.

What's the Best Asset Allocation for Someone 10 Years Away from Retirement?

December 22, 2025
Key Takeaways Your guaranteed income sources (pensions, Social Security) matter more than your age when deciding allocation. Retiring at 65 doesn't mean your timeline ends. You likely have 20-30 years of investing ahead. Think in time buckets: near-term stability, mid-term balance, long-term growth. You're 55 years old with over a million dollars saved for retirement. Your 401(k) statements arrive each month, and you find yourself questioning whether your current allocation still makes sense. Should you be moving everything to bonds? Keeping it all in stocks? Something in between? There's no single "correct" asset allocation for everyone in this position. What works for you depends on factors unique to your situation: your retirement income sources, spending needs, and risk tolerance. Let's look at what matters most as you approach this major life transition. Why Asset Allocation Changes as Retirement Approaches When you’re 30 or 40, your investment timeline stretches decades into the future. When you’re 55 and looking to retire at 65, that equation changes because you’re no longer just building wealth: you’re preparing to start spending it. You need enough growth to keep pace with inflation and fund decades of retirement, but you also need stability to avoid the need to sell investments during market downturns. At this point, asset allocation 10 years before retirement is more nuanced than a simple “more conservative” approach. Understanding Your Actual Time Horizon Hitting retirement age doesn't make your investment timeline shrink to zero. If you retire at 65 and live to 90, that's a 25-year investment horizon. Think about your money in buckets based on when you'll need it: Time Horizon Investment Approach Example Needs Short-Term (Years 1-5 of Retirement) Stable & accessible funds Monthly living expenses, healthcare costs, and early travel plans Medium-Term (Years 6-15) Moderate risk; balanced growth Home repairs, care and income replacement, and helping grandchildren with college Long-Term (Years 16+) Growth-oriented with a Long-term care expenses, decades-long timeline legacy planning, and extended longevity needs This bucket approach helps you think beyond simple stock-versus-bond percentages. Asset Allocation 10 Years Before Retirement: Starting Points While there's no one-size-fits-all answer, here are some reasonable starting frameworks: Conservative Approach (60% stocks / 40% bonds) : Makes sense if you have minimal guaranteed income or plan to begin drawing heavily from your portfolio upon retirement. Moderate Approach (70% stocks / 30% bonds) : Works well for those with some guaranteed income sources, moderate risk tolerance, and a flexible withdrawal strategy. Growth-Oriented Approach (80% stocks / 20% bonds) : Can be appropriate if you have substantial guaranteed income covering basic expenses and the flexibility to reduce spending temporarily as needed. Remember, these are starting points for discussion, not recommendations. 3 Steps to Evaluate Your Current Allocation Ready to see if your current allocation still makes sense? Here's how to start: Step 1: Calculate your current stock/bond split. Pull your recent statements and add up everything in stocks (including mutual funds and ETFs) versus bonds. Divide each by your total portfolio to get percentages. Step 2: List your guaranteed retirement income. Write down income sources that aren't portfolio-dependent: Social Security (estimate at ssa.gov), pensions, annuities, rental income, or planned part-time work. Total the monthly amount. Step 3: Calculate your coverage gap. Estimate monthly retirement expenses, then subtract your guaranteed income. If guaranteed income covers 70-80%+ of expenses, you can be more growth-oriented. Under 50% coverage means you'll need a more balanced approach. When to Adjust Your Allocation Here are specific triggers that signal it's time to review and potentially adjust: Your allocation has drifted more than 5% from target. If you started at 70/30 stocks to bonds and market movements have pushed you to 77/23, it's time to rebalance back to your target. Your retirement timeline changes significantly. Planning to retire at 60 instead of 65? That's a trigger. Every two years of timeline shift warrants a fresh look at your allocation. Major health changes occur. A serious diagnosis that changes your life expectancy or healthcare costs should prompt an allocation review. You gain or lose a guaranteed income source. Inheriting a pension through remarriage, losing expected Social Security benefits through divorce, or discovering your pension is underfunded. Market volatility affects your sleep. If you're checking your portfolio daily and feeling genuine anxiety about normal market movements, your allocation might be too aggressive for your comfort, and that's a valid reason to adjust. Beyond Stocks and Bonds Modern retirement planning involves more than just deciding your stock-to-bond ratio. Consider international diversification (20-30% of your stock allocation), real estate exposure through REITs, cash reserves covering 1-2 years of spending, and income-producing investments such as dividend-paying stocks. The Biggest Mistake: Becoming Too Conservative Too Soon Moving everything to bonds at 55 might feel safer, but it creates two significant problems. First, you're almost guaranteeing that inflation will outpace your returns over a 30-year retirement. Second, you're missing a decade of potential growth during your peak earning and saving years. The difference between 60% and 80% stock allocation over 10 years can mean hundreds of thousands of dollars in portfolio value. Being too conservative can be just as risky as being too aggressive, just in different ways. Questions to Ask Yourself As you think about your asset allocation for the next 10 years: What percentage of my retirement spending will be covered by Social Security, pensions, or other guaranteed income? How flexible is my retirement budget? Could I reduce spending by 10-20% during a market downturn? What's my emotional reaction to seeing my portfolio drop 20% or more? Do I plan to leave money to heirs, or is my goal to spend most of it during retirement? Your honest answers to these questions matter more than your age or any generic allocation rule. Work With Professionals Who Understand Your Complete Picture At Five Pine Wealth Management, we help clients work through these decisions by looking at their complete financial picture. We stress-test different allocation strategies against various market scenarios, coordinate withdrawal strategies with tax planning, and help clients understand the trade-offs between different approaches. If you're within 10 years of retirement and wondering whether your current allocation still makes sense, let's talk. Email us at info@fivepinewealth.com or call 877.333.1015 to schedule a conversation. Frequently Asked Questions (FAQs) Q: What is the rule of thumb for asset allocation by age? A: Traditional rules like "subtract your age from 100" are oversimplified. Your allocation should be based on your guaranteed income sources, spending flexibility, and risk tolerance; not just your age. Q: Should I move my 401(k) to bonds before retirement? A: Not entirely. You still need growth to outpace inflation. Gradually shift toward a balanced allocation (60-80% stocks, depending on your situation) and keep 1-2 years of expenses in stable investments. Q: What's the difference between stocks and bonds in a retirement portfolio?  A: Stocks provide growth potential to keep pace with inflation but come with volatility. Bonds offer stability and income but typically don't grow as much.