The creditor protection rules that apply to retirement accounts are complex and frequently misunderstood. In an effort to correct some of the most frequently misunderstood concepts and provide some clarity in these seemingly murky waters, below we explore 5 Retirement Account Creditor Protection Myths and then give you the real facts behind them.
Myth #1 – Retirement Money is Universally Protected from Creditors
Fact: While much of the money, and indeed, perhaps all the money you have in your retirement accounts is likely shielded from your creditors, you shouldn’t automatically assume that to be the case. Retirement funds receive varying degrees of creditor protection depending on a number of factors, including the type of retirement account the funds are in, such as a 401(k) vs. an IRA, and what state you happen to live in.