How to Protect Your Retirement Savings From Creditors

These laws and government agencies can help you keep your nest egg intact.


Many of us worry about what could happen to our retirement investments if our plan were to be terminated or mismanaged. Creditors can also come looking for your retirement money. Here are some protections designed to help you keep your nest egg intact.

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The Pension Benefit Guaranty Corporation (PBGC). When a company files for bankruptcy or goes out of business, you might find that your former employer plans to get rid of your defined-benefit pension plan. This can be frustrating and cause you to worry that the money you were promised won’t be coming. But a government agency, the Pension Benefit Guaranty Corporation, insures most private sector traditional pension plans. You are entitled to receive the benefits you were promised, up to certain limits, if your employer becomes unable to pay them. You can check the maximum monthly guarantee tables at

State Insurance Guaranty Associations. Many states have their own insurance guaranty funds. These funds are meant to help you in the event that an insurance company providing you with an annuity fails. Rather than being left with nothing, you can get coverage from the fund. Make sure that you are eligible for this coverage before committing to an annuity product and find out the limit on the coverage. Even if the coverage is limited, some protection is better than nothing. You can also reduce your risk by buying an annuity from a financially healthy insurance company.

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The Employee Benefits Security Administration (EBSA). The Labor Department’s Employee Benefits Security Administration is there to help you get the benefits you deserve. While there is no protection when the stock market tanks or your 401(k) loses value, there are protections for other situations. If you think that your retirement plan is being mismanaged, you can contact the EBSA for help with the investigation. Additionally, you can also get access to some of your benefits if your plan is damaged by an employer’s bankruptcy or a merger with another company.

Creditors and your retirement accounts. If you get into debt trouble, your retirement accounts are protected. Thanks to the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, your tax-deferred retirement accounts are protected from creditors looking to be paid off up to $1 million. If you are having trouble getting back on your feet, it won’t be necessary to raid your retirement fund to pay off your creditors. However, you might have to take other actions to fulfill your obligations.

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Knowing what tools are available to you is an important part of preparing for retirement. While you can’t count on all of your retirement money being protected, there are some tools at your disposal. Learn about the protections and guarantees associated with the different retirement vehicles you use so that you can make a more effective plan and reduce the risk associated with your investments.

Jeff Rose is a certified financial planner and U.S. combat veteran. He blogs at Good Financial Cents and Soldier of Finance.