With debt burdening many Americans, preretirees and retirees should understand the creditor protections for retirement accounts before raiding those accounts through loans or withdrawals. Those protections can help preserve hard-earned savings even after suffering a tough financial squeeze.
But the rules for those protections vary by account type, which IRA expert Ed Slott and his team explained at Slott’s recent two-day workshop in National Harbor, Md. Company retirement plans, such as 401(k)s, are the most secure because federal law protects them from creditors. IRAs also provide federal creditor protection in bankruptcy situations only for up to $1,362,800 of IRA contributions and earnings in 2019 (that threshold adjusts for inflation). IRA money rolled over from company plans receives unlimited bankruptcy protection.
In most cases, state law dictates creditor protection for IRAs when it comes to other judgments. Someone who has significant concerns about creditor protection might consider leaving money in a company plan instead of rolling it over to an IRA.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Regardless, before doing a rollover, it’s a good idea to check the protections that the law provides in your state. Some states offer limited or no creditor protection. To ensure the unlimited bankruptcy protection for rollovers, keep good records or roll a company plan into an IRA separate from other IRAs you own.
-
-
Lawmakers Propose Tax Hikes to Combat Climate Change
Climate change is prompting some lawmakers to propose property tax hikes to fund mitigation efforts while scientists say that global warming could reach a critical level in less than a decade.
-
I Wish I May, I Wish I Might: Estate Planning’s Gentle Nudge
Contrary to what you might expect, using precatory language such as ‘I wish’ or ‘I hope’ can play an important part in three estate planning objectives.
-
Best Cash Back Credit Cards March 2023
Smart Buying Looking for the credit card that pays the most cash back? These lenders may pay hundreds of dollars, with minimum hassle.
-
I-Bond Rate Is 6.89% for Next Six Months
Investing for Income If you missed out on the opportunity to buy I-bonds at their recent high, don’t despair. The new rate is still good, and even has a little sweetener built in.
-
What Are I-Bonds?
savings bonds Inflation has made Series I savings bonds enormously popular with risk-averse investors. How do they work?
-
Your Guide to Open Enrollment 2023
Employee Benefits Health care costs continue to climb, but subsidies will make some plans more affordable.
-
Watch Out for Flood-Damaged Cars from Hurricane Ian
Buying & Leasing a Car In the wake of Hurricane Ian, more flood-damaged cars may hit the market. Car prices may rise further because of increased demand as well.
-
What You Need to Know About Life Insurance Settlements
life insurance If your life insurance payments don’t seem worth it anymore, consider these options for keeping the value.
-
As the Market Falls, New Retirees Need a Plan
retirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
-
Retirees: Your Next Companion May Be a Robot
happy retirement Robots may help fill the gap left by a shortage of humans to help older adults live independently.
