Our Family of Companies
western & southern financial group logo
western & southern life logo
columbus life logo
eagle realty group logo
Fabric by Gerber Life
fort washington logo
gerber life logo
integrity life logo
lafayette life logo
national integrity life logo
touchstone investments logo
w&s financial group distributors logo

Can I Protect Retirement Savings From Creditors?

Personal Finance
Senior Couple Walking Their Dog Discussing Protecting Retirement Savings From Creditors

In many cases, laws protect retirement savings from creditors, but there are limitations. The limitations depend on what type of creditor you're dealing with, the types of retirement accounts you have, the state you live in and other factors.

Whether you're involved in a lawsuit, you default on loans or you owe tax debts, it might be best to discuss the details with a legal expert. State law might provide additional protection that goes beyond federal rules, and an expert can help you navigate those waters. Here is some information to consider.

Workplace Retirement Plans

Many employer-sponsored plans are protected by the Employee Retirement Income Security Act (ERISA). General creditors cannot force you to remove funds from a 401(k) plan or other qualified retirement plans, which includes 401(k), 403(b), pension and cash balance plans, and other arrangements. These are some exceptions.

Divorce proceedings

If you are divorced and owe money to an ex-spouse, they may have rights to your retirement savings. Under a Qualified Domestic Relations Order (QDRO), an ex-spouse can satisfy child support, alimony or other marital property rights through your retirement plan. To do so successfully, the order likely needs to meet specific criteria.

Federal tax debts

When you owe the IRS money, your 401(k) is fair game. The IRS has the right to levy (or seize) assets from retirement accounts, a method that's usually unavailable to other creditors.

IRA Protection

What happens if you move money in your retirement savings to an individual retirement account (IRA)? As individual accounts, IRAs typically don't fall under the same set of rules that cover employer-sponsored plans. IRAs are protected in many cases, and details depend on the specific situation. Here are some examples:

Rollovers from employer accounts

When you roll money over from an ERISA-governed workplace plan, you might keep the same level of protection as an employer-sponsored plan. You'll likely need to document the source of those funds to prove that your assets originally came from a qualified retirement plan.

Individually funded accounts

You still might be able to protect retirement savings when you fund your IRA from personal accounts or self-employment earnings. State laws provide relief in some cases, but the specifics vary from state to state. If you declare bankruptcy, federal law may allow you to keep money in your IRA under the Bankruptcy Abuse Prevention and Consumer Protection Act.

Inherited IRAs

Inherited accounts are typically less protected from creditors than standard IRAs. In 2014, the U.S. Supreme Court ruled that assets in an inherited IRA would not be protected during bankruptcy, but it only applies to bankruptcy proceedings.

Tax debts

As with employer-sponsored plans, there is no asset protection in your IRA when you owe the IRS money.

General creditors

States determine whether or not creditors can access your retirement savings, and those cases might include:

  • Civil and criminal proceedings
  • Alimony payments
  • Defaulted loans

Getting the Answers

Your retirement funds are often safe from creditors, but that's not always the case. This only covers some of the potential scenarios, so you'll likely still want to talk to a legal expert for more information on how to help protect retirement savings.

Related Articles


Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.