Dealing with debt is something that most adults are familiar with. The average person in the United States is one unexpected event away from a financial disaster, meaning that the majority of adults have dealt with creditors at one point or another. Once an adult retires, he or she expects to spend the remainder of life enjoying time with friends and family members, but it is not unusual for a retired adult to continue dealing with debt. A person living on a fixed income is uniquely vulnerable to aggressive debt collection tactics and many fear having their retirement account seized by an unscrupulous creditor.

 Who is the Creditor?

When it comes to retirement accounts and debt, it is important to know who the creditor pursuing you is. Certain government creditors have the ability to seize the funds in any type of account that they are able to locate. The Internal Revenue Service is one government organization that is able to seize funds in a 401(k) plan, IRA, or a pension. It may be possible to come to payment terms before the funds are seized, but failing to act to resolve debts owed to federal agencies can place your retirement accounts at risk. If the creditor is a private organization, then your retirement accounts should be protected.

Save Funds in Protected Accounts

A person who is retired and dealing with aggressive collection actions should make sure that his or her retirement assets are kept in an appropriate account. If you are keeping funds for your retirement in a traditional savings account or money market account, then you run the risk of having funds seized by a creditor who is able to obtain a judgement against you. Also, certain retirement accounts, including an IRA, offer less protection against creditors than a traditional 401(k) plan. It is important to maximize contributions and avoid rolling retirement assets into retirement accounts that are not firmly protected under California law.

Do Not List Retirement Accounts as Security

While obtaining a loan for personal or business needs a creditor may suggest that you use retirement assets as security. A person who does not experience cash flow problems or who rarely has issues with creditors may be tempted to agree to the terms, but once you have listed a retirement account as security for a loan, the funds could be placed in jeopardy if you default.  Depending on the type of loan, your creditor could attempt to seize retirement funds even if you file for bankruptcy. It is important to never use retirement funds as an asset for security with any creditor.

Contact an Attorney

Preparing properly for retirement is the best way to ensure your future and the future of your spouse. Though setting up a retirement account may not seem difficult, in certain states like California, a lack of knowledge regarding protected retirement accounts could place you and your spouse at risk. MMZ LAW understands how important it is to prepare adequately for your retirement. Contact us today to schedule an appointment to discuss what retirement savings options will be safest for you. We are located in the Claremont Village near Upland, Pomona and San Dimas. We service in Estate Planning, Probate, and Elder Law through Medi-Cal Asset Protection. Call now (909) 256-6702 for your FREE consultation.



341 W. 1st St. Suite 100
Claremont, CA 91711

MARIVEL M. ZIALCITA is the founder of MMZ LAW, A Professional Corporation, where she practices in the areas of trust & estate, elder law, special needs, conservatorship, trust administration, and probate. Ms. Zialcita is a frequent speaker on trust and estate matters and holds memberships in the State Bar of California, Trust and Estate Section, The San Bernardino County Bar Association, Wealth Counsel and Elder Counsel. She currently assists in the pro bono legal services program at the James L. Brulte Senior Center in Rancho Cucamonga, California. She is based in Claremont but assists clients throughout Southern California.

This information is educational information only and not legal advice.