The most common error people commit when managing their investment accounts can be corrected in just 5 minutes.

Financial experts typically advise that the less you monitor your investing accounts, such as 401(k)s and IRAs, the better.

By diversifying your portfolio and remaining risk-tolerant, you can minimize the impact of daily market fluctuations on your investments. Instead of constantly worrying, let compound interest work its way over the long-term to generate significant returns.

If you neglect to update your beneficiaries, you could make a costly mistake, according to Ed Slott, a certified public accountant and founder of IRAHelp.com.

"The most common mistake people make is assuming that their beneficiary form takes precedence over their will. However, many individuals are unaware of this and do not update their beneficiary forms accordingly."

It's crucial to review and update your beneficiaries regularly, especially if you haven't done so since opening your accounts.

Update your beneficiaries now to avoid disaster later

If you do not designate a beneficiary, your loved ones may have to go through a lengthy and arduous court process known as probate to determine who will receive your assets after your death.

You can designate a beneficiary by logging onto your brokerage or plan administrator's website and providing details such as the recipient's name, date of birth, and, if desired, Social Security number.

Why should you check your beneficiary designations regularly? Even though the process is usually quick and straightforward, it's essential to ensure that your wishes are carried out after your passing. If you fail to update your beneficiaries, the wrong individuals may inherit your savings.

In 1987, Jeffrey Rolison enrolled in the Procter & Gamble 401(k) plan and designated his then-girlfriend, Margret Losinger (nee Sjostedt), as his beneficiary. However, the couple separated in 1989.

"For years, they reminded him about the shift to digital beneficiary forms. 'Do you want to update your information?' he was asked. However, he never made any changes."

In 2015, after Rolison's death, a woman who he had broken up with decades prior received approximately $750,000 from his account. However, his estate unsuccessfully challenged the inheritance.

To prevent a similar fate for your loved ones, Slott advises updating the beneficiaries on all your accounts annually. He also suggests being vigilant during life events such as births, deaths, marriages, divorces, new grandchildren, and changes in tax laws.

Beneficiary designations usually take precedence over a will or trust and are typically paid out directly by your brokerage or plan provider to the individuals you designate. It is important to inform the people you name of their designation. For example, Fidelity's policy states that beneficiaries must contact the company themselves to receive their assets, and that the distribution of assets will be made without requiring a will or other legal documents.

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