6 Situations When Your Retirement Account is Legally EXPOSED

April 30, 2019  --  Episode #308

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Your IRA or 401(k) is protected by law, isn’t it? I mean, if some whack job sues you and somehow wins, they can’t take away your retirement savings, can they? It’s all protected… right? Well, yes… sort of. It turns out there are actually SIX DIFFERENT CIRCUMSTANCES when that vaunted legal protection will melt faster weaker than an ice cube on the sidewalk at high noon during a Georgia summer. What are those 6 circumstances… and how do you protect yourself against them? Find out now in Episode #308 of Self-Directed Investor Talk!



Your IRA or 401(k) is protected by law, isn’t it?  I mean, if some whack job sues you and somehow wins, they can’t take away your retirement savings, can they?  It’s all protected… right?  Well, yes… sort of.  It turns out there are actually SIX DIFFERENT CIRCUMSTANCES when that vaunted legal protection will melt faster weaker than an ice cube on the sidewalk at high noon during a Georgia summer.  What are those 6 circumstances… and how do you protect yourself against them?  I’m Bryan Ellis.  This is episode #308.

Hello, self-directed investors, all across the fruited plane!  Welcome to another exciting episode of Self-Directed Investor Talk, the show of record for savvy self-directed investors like you, where in each episode, I help you to find, understand and profit from exceptional alternative investment opportunities.

Today is episode #308.  Today’s show page and transcript can be found at SDITalk.com/308, along with links to past shows, and links to the NEXT show as well, so check it out there at SDITalk.com/308.

So here’s the deal, people… there’s a very broad belief out there that, just by virtue of being held inside of an IRA or 401(k), that your retirement savings are therefore safe from things like lawsuits, bankruptcy or other legal risks.

Have you ever heard that?  Maybe you even believe it yourself?  Hmmmm….

Well, good news!  In part, anyway.  A little good news is better than none at all, right?

So here’s the good news:  You’re right.  Somewhat.  Sort of.  To an extent.  Maybe.  Depending on… well,  you get the point.

The bad news about those protections is that not only are they not absolute, but they are more porous than swiss cheese.  And it occurs to me in the moment that that comparison goes one step further, actually… did you know “swiss” cheese is almost never actually SWISS in any way?  In much the same way that so-called asset-protected retirement accounts aren’t actually particularly well protected.  But I digress… and thus concludes today’s tortured metaphor of legal issues with dairy products, hehehehe.

So, being the intelligent, inquisitive and now somewhat alarmed owner of a retirement account, you’re doubtlessly wondering:  To what extent ARE my savings protected?

Well that, my friends, is a great question.

And the answer is:  There is no single answer.  I’m no lawyer, but like the best of them, I’ve got to give you a clear, decisive IT DEPENDS.

On what?  Well… there are a number of factors.

Rather than boring myself to tears with a detailed discussion of the Internal Revenue Code 408 and 4975 and ERISA and other such important but cringe-worthy technicalities, I will instead outline for you 6 different questions that reveal circumstances under which the vaunted asset protection of a retirement account puts up less resistance than a sex addict at a porn convention.

Here we go…

Number 1:  In what state do you live?

This is relevant because it’s actually STATE law that determines how resistant your IRA is to judgments and such.  In many, many states, there’s really substantial protection for your retirement account from creditors and such.  In some states, the protection is NEAR absolute, with only a few specific and kind of weird exclusions.  In Maryland, for example, my reading of the law suggests that IRA’s are basically exempt from all claims against the owner of the account, unless the Maryland Department of Health & Mental Hygiene has an issue with that person.  And God knows you don’t want to be on the wrong side of the Mental Hygiene people.

But then, there are other states that see things a little differently.  The banner example of this is, of course out on the Left Coast in the Golden State of California, where the rules about IRA’s are something like this:  You have no rights.  If the judge, in his or her sole discretion, decides that you don’t actually need your IRA to fund your retirement, then they can take it away from you, period.  In fact, even if you don’t have other means to fund your retirement but the judge perceives you as sufficiently youthful and capable to rebuild your retirement savings after it’s wiped out, then chances are pretty good it’s going to be wiped out.  So in California, you can’t really bank on your IRA having any protection at all.

There are other states – like Maine, for example – that appear to work similarly.  And then others exist somewhere in the middle by limiting the amount of protection you receive according to account type or how you use the money or other factors.

So what’s the answer for YOUR state?  Now surely, surely, surely my friend… you don’t really want me to actually list each state right now and tell you how this question plays out in all 50 of them, do you?  I didn’t think so.

But… never fear!  If you’d like a spreadsheet that gives you the rules for each state, I’m happy to provide it… and free of charge, no less.  Just text the word SDITALK to 833-212-2112 and we’ll get you the info you need with our compliments.

Moral of the story?  Where you live really, really matters.  If you live in one of the many states that provide robust protection for your IRA, you can breathe a bit easier…

Assuming, of course, that none of the other 6 circumstances apply to you, on to #2 of which we move presently, that being:

Number 2:  What kind of retirement account do you have?

Specifically, what I mean is:  Do you have a traditional IRA?  A SEP IRA?  A Roth IRA?  A Spousal IRA?  Maybe you don’t have an IRA at all but rather a 401(k) or 403(b)?

What kind of account – or accounts, plural – do you have?

It turns out that where asset protection is concerned, this is a HUGE FREAKING DEAL.


Well, I’ll give you the answer to that in the next episode – Episode #309 – which, depending on when you’re listening, is probably already waiting for you right now over at SDITalk.com/309, SDITalk.com/309.

Check it out now and in the mean time, remember this:

Invest wisely today, and live well forever!


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Bryan Ellis

I am host of Self Directed Investor Talk, which I'm told is America's #1 podcast and for affluent self-directed investors. I'm also something of an expert in self-directed IRA's, solo 401k's and 1031 exchanges. You can find more of my writing in some cool places like TheStreet.com, Entrepreneur.com, ThinkRealty and even Forbes (that was always one of my goals!). I live in metro Atlanta, Georgia with my wife and business partner Carole Ellis(she's a real business partner... not just because she's my wife... I'd want to work with her if I wasn't married to her... and I'd want to marry her, too). I also have 4 children ranging in age from 2 to 20 (yes, you read that correctly). It's my goal to be the name everybody thinks of when they think of Self-Directed IRA's and Solo 401(k)'s.