Can a creditor seize my retirement savings?
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.
The answer is typically no - they can not. However to what level the protection holds, it really depends on state laws regarding homestead and asset protections. There are also Federal laws.
To be clear, this is related to qualified retirement plans and ERISA Plans (like IRAs, Roth IRAs, 401k's and Pension plans and not necessarily other types of accounts). Some states have very generous exemptions on annuities and insurance products as well.
As an example, in Texas our retirement savingsare pretty much 100% protected.
Note that there was recent court cases that have now excluded inherited IRAs from Federal protections - see my article:
Employer-sponsored plans, like 401(k) and 403B plans, are covered under ERISA and fully exempt from creditor claims by federal law. With IRAs, it depends on your state of residence. While most states do protect IRA accounts from creditors, there are a few states who either don't or that provide only partial protection.
The best strategy is to either research the laws in your state, or consult with an attorney as to what the law is.
That sounds like a simple question but the answer is quite complicated and has been the basis for many lawsuits and legal judgments. It varies enormously from state to state and the gray areas are wide. Usually, assume that creditors can seize your retirement savings, and that IRA accounts are easier to seize than employer plans like a 401(k), 403(b), or 457. If the creditor is the IRS then they can seize all of the above and more. Private creditors have far more restrictions but it depends upon the terms of your relationship with them. Usually it is much easier for a creditor to collect in a situation where they are the lender and you are the borrower with promised periodic loan payments where you didn't follow the written payment schedule, or where they are the landlord and you didn't pay your rent according to a written lease. It is harder for someone to collect in a business dispute of any kind or when any arrangement involved non-written agreements.
It depends on where your retirement savings are. ERISA sponsored plans like 401(k) and 403(b) have the highest creditor protection. Traditional nd Rollover IRA have a limited Federal law protection of up tp $$1,283,025 for 2016, which is well above the balance saved by the average American family, Inherited IRA, savings and brokerage accounts do not have a credit protection and can be seized by a creditor.