Can a creditor seize my retirement savings?

By Matt Lee AAA
A:

Whether a creditor can seize your retirement savings will depend on the type of account in which you are holding your retirement savings and the creditor that is seeking repayment.

If your creditor is a government organization, such as the IRS, then none of your accounts, not even your 401(k) plan or your pension plan accounts, is protected. Although the IRS is unlikely be able to force these funds directly out of your account, it will be able to take all or a portion of any distributions you take from these accounts. On the other hand, your 401(k), IRAs and your pension plan funds are protected from general creditors to whom you may owe outstanding debts.

However, creditors can seize any of your retirement savings if you have named these financial assets as security for any loans you may have taken or if you have entered into bankruptcy. However, while in bankruptcy proceedings, there is still some protection against any creditors seizing all of your retirement assets. Assets held in registered retirement plans, such as IRAs, 401(k)s and pension plans, will likely be protected during bankruptcy proceedings, but this will depend on federal laws and the state laws that are applicable to you.

To prevent your creditors from seizing any of your retirement savings, you could be sure to maximize your eligible contributions to registered retirement accounts and to never name any retirement savings as security for a loan. If your funds are not in a registered retirement account, then these funds may be seizable during bankruptcy or collection processes.

To read more about what assets are protected during bankruptcy, read Bankruptcy Protection For Your Accounts and What You Need To Know About Bankruptcy.

RELATED FAQS

  1. Are qualified retirement plans protected from creditors?

    Learn how to protect your retirement assets from creditors. Certain provisions provide for exemption of retirement assets ...
  2. Can I purchase mutual funds for my IRA?

    Learn how to invest your IRA assets in mutual funds. Discover a few of the different types of mutual funds available for ...
  3. What is the minimum amount of money that I can invest in a mutual fund?

    Learn about investing in mutual funds even with a smaller initial investment; there are many funds available to investors ...
  4. Can I purchase mutual funds for my IRA?

    Learn how to invest your IRA assets in mutual funds. Discover a few of the different types of mutual funds available for ...
RELATED TERMS
  1. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  2. Variable Annuitization

    An annuity option in which the amount of income payments received ...
  3. Gold IRA

    Definition of Gold IRA
  4. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  5. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all ...
  6. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose ...
Related Articles
  1. If that's always been your dream, there actually are affordable ways to retire in France. Some regions to explore and some cautions to keep in mind.
    Retirement

    Can You Afford To Retire In France?

  2. Here's how to incorporate life insurance into a plan to ensure that you and your family have the smoothest possible transition into retirement.
    Retirement

    The Smart Way To Use Life Insurance ...

  3. A delightful climate, World Heritage sites and a low cost of living are just some of the reasons to retire to Ecuador. Here's more about what to expect.
    Retirement

    Why Retiree Expats Adore Ecuador

  4. Government employees don't receive Social Security and 401(k)s for their government work. Learn about these other tools to plan for a good retirement.
    Retirement

    Work For The Government? Top Retirement ...

  5. The names sound similar – continuing care, assisted living – but retirement communities differ widely. How to tell them apart and what you'll need to pay.
    Retirement

    Don't Pick The Wrong Type Of Retirement ...

Trading Center