Is a Retirement Account Judgment Proof?

Retirement accounts offer some measure of protection against judgments. But you must understand how these protections work. You may be limited in your protections, depending on the account involved. If you lose your retirement funds in a lawsuit, you'll have to start your savings plan over, or you may not be able to retire as planned.

ERISA Qualified

Some retirement plans are protected by the Employee Retirement Income Security Act (ERISA). ERISA protects these plans against judgments from creditors and from bankruptcy. An example of an ERISA-protected plan is a 401k. This means you cannot lose your retirement account to a creditor. However, you may not be able to make additional contributions to your account, depending on the circumstances of your case and the decision of the court.


Non-qualified accounts are retirement accounts not qualified under ERISA. An example of this type of plan is an annuity. Protections for non-qualified accounts vary according to the state in which you live. Annuities, for example, enjoy complete protection in some states, but no protection in others.


IRAs are protected under the Bankruptcy Abuse Prevention And Consumer Protection Act of 2005. This act exempts up to $1 million of benefits in the IRA. Anything above this amount may be taken to satisfy a judgment. You may not be able to make additional contributions to your IRA, depending on your specific circumstances.


In all cases, you are not protected if the court suspects you are attempting to defraud your creditors. You may not hide money that should otherwise be paid in a judgment. The intent of the protections is to secure money you've already saved. It's not meant to help you avoid paying your creditors money you owe to them.