Is a Retirement Account Judgment Proof?

Retirement accounts are highly regulated. Images

Imagine yourself living the golden years you saved for all your life, enjoying your retirement and spoiling your grandchildren. What if you could lose it all because a creditor put a lien on your retirement funds? Fortunately, retirement accounts are protected from many kinds of liens and garnishments. In most cases, your retirement account is virtually judgment proof.


Judgment creditors can file writs of garnishment against your checking accounts, savings accounts and other deposit accounts. Retirement accounts, however, are generally exempt from garnishment. If a creditor serves a writ of garnishment on the bank or brokerage house where you hold your retirement account, the financial institution is not required -- or permitted -- to honor the writ by withdrawing funds from your retirement account. Any other accounts you hold with the same bank may be at risk, but your retirement funds, with a few exceptions, are safe.


A retirement account is sheltered from most civil judgments, but it may be vulnerable to other types of judgments. For example, a court order known as a "domestic relations order" divides retirement accounts in a divorce, and your bank or retirement plan administrator must honor such an order. Similarly, if you owe child support or alimony and you receive pension benefits under ERISA, a federal pension law that governs most pensions, your pension benefits can be garnished to pay your child support or alimony. Retirement accounts can also be seized to satisfy judgments for unpaid taxes and criminal fines.

Protected Accounts

The retirement accounts that are generally protected from execution of judgments include traditional Individual Retirement Accounts, Roth IRAs, pension benefit funds and employer-sponsored retirement accounts. State law may provide additional protection for certain accounts. For example, Georgia law guards the pensions of state and local workers such as firemen, teachers, sheriffs, legislators, judges, court clerks and district attorneys. According to state law, these employees' pensions are not subject to garnishment.


Retirement funds are only protected from judgments while those funds are held in a retirement account. After distribution to the retiree, retirement funds may be subject to garnishment. For instance, if you withdraw money from a retirement account to buy a house, a judgment creditor can file a lien against that house even though it was purchased with retirement funds. Your retirement savings are no longer "judgment proof" after you withdraw them from your retirement accounts.