How Creditor Proof Is Your Retirement Account?
In some ways, worrying about whether the money in your retirement account is enough to sustain you in retirement is a high class worry; if you have an employer-provided retirement account, you are in a better position than most. At minimum, you will get Social Security income when you retire, plus a modest distribution from your retirement account. Estate planning lawyers often advise clients about how to protect your estate from creditors during probate, but asset protection does not have to be so complicated. In fact, the mere existence of your employer-provided retirement account is one of the best asset protection strategies you can follow. For help envisioning what you can afford with your employer-retirement account and avoiding mistakes that can cause your account to incur penalties, contact a Tampa estate planning lawyer.
Things That Can Jeopardize Your Retirement Account
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets guidelines for public sector retirement pensions and private employer-provided retirement accounts. It protects retirement accounts from various situations that could deplete the accounts before the employee and his or her dependents can benefit from them, such as creditor claims or mismanagement by fiduciaries. Besides these federal protections, Florida law generally protects employer-provided retirement accounts, such as 401(k) accounts and IRA accounts, from creditor claims before and after the employee retires.
There are some circumstances, however, where the balance of your retirement account can get smaller instead of bigger. Employer-provided retirement accounts are, as a rule, low risk, so if the accounts investments begin to lose value, the fiduciaries responsible for the account will change the investments before the next quarter. Mismanagement of accounts can cause your retirement account to lose value, but if this happens, legal remedies are available to you.
Another scenario where a portion of your retirement savings might not translate into retirement income for you is if you get divorced. If you divorce after a long marriage, the judge can issue a qualified domestic relations order (QDRO). This court order requires the judge to pay out a portion of your retirement savings to your ex-spouse.
The Biggest Enemy of Your Retirement Account Is You
The most common reason that people’s retirement account balances get smaller before retirement is when the employees make withdrawals from the accounts while they are still in the workforce. This phenomenon is most common among people in their 50s and 60s who are using the money to assist their adult children, usually in matters of debt repayment or contributing to a down payment on a house so that the employee’s children can qualify for a more affordable mortgage. Recent data shows that women take early withdrawals from their retirement accounts for the benefit of their children more often than men do.
Contact David Toback About the Role of Your Retirement Account in Your Estate Plan
A Central Florida estate planning lawyer can help you make wise decisions about your employer-provided retirement account. Contact David Toback in Tampa, Florida to set up a consultation.
Source:
dol.gov/general/topic/retirement/erisa#:~:text=The%20Employee%20Retirement%20Income%20Security,for%20individuals%20in%20these%20plans.
