Retirement savings: Hedge against poverty today AND in retirement

Large IRA's not fully protected from bankruptcy or lawsuit seizure?: "Under federal ERISA law, assets held in most employer-based retirement plans such as 401(k)s, pension plans, 403(b)s, and profit-sharing plans have generally been beyond the reach of creditors. " (The IRS, however, can seize pretty much anything they want.)

The linked article goes on to explain that IRAs don't enjoy quite the same protections, but they are also protected.

Think about this - if someone sued you, they could potentially seize your house, car, and savings to satisfy a judgement, but they couldn't touch your 401k. If someone did seize all of your assets and you were broke as a result, however, you could withdraw from your 401kto pay some bills.

There are limits to how much you can put into a retirement account each year. If you are young and dumb and can barely pay your student loans, it can be really tempting to skip the 401k for now. When you're eventually rich and famous, you won't be able to make up those missed contributions, and you'll probably hit the contribution ceiling when you're old enough and successful enough to really start planning for retirement. So make whatever contributions you can, and avoid withdrawing retirement funds. If you have to tap your retirement account, try to take a loan against it instead of a withdrawal. You'll not only bulk up your retirement accounts, but you'll build assets that can survive bankruptcy, foreclosure, or losing a lawsuit.



Note: This is not intended as legal, tax, or financial advice, but merely a topic of interest to spark further investigation. Please speak with your tax, legal, and/or financial advisor to determine the full details of the law and how/whether it can apply to your personal situation.