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Money July 2017

Dollar Sense

Potpourri: Miscellaneous Stuff You Should Know to Protect Your Retirement Funds, Your Investments, and More

By Teresa Ambord

What if your creditor is Uncle Sam? The IRS can levy your IRA if you owe them money. Typically, the IRS will go after other assets first, but you should know your IRA is not off limits. And to add insult to injury, the distributions levied will be taxable income to you.

Would You Trust Me with Your Retirement Funds?

You’ve seen the commercials featuring a disc jockey who is successfully masquerading as a financial advisor. The point, of course, is that with the right look and the right words, it’s easy to scam even savvy investors. Unfortunately, it happens a lot, and not only to the unsophisticated. That’s why the federal government has created an easy access website, where you can do some checking before you do some check writing.

Here’s a brief look at one resource on “Five Questions to Ask Before You Invest.”

  1. Is the seller licensed? Con artists, after all, are often very slick at the con they are pushing, so much so that even enormously wealthy investors have been taken to the cleaners. In other words, don’t trust your gut.
  2. Is the investment registered? Check with the Securities and Exchange Commission before you buy, as legitimate securities must be registered with the SEC or exempt from registration. On the website you’ll find the Edgar database where you can check investments, or call 1-800-732-0330.
  3. How do the risks compare with the potential rewards? It’s common for investments to be pitched as having little or no risk. If you are offered such an “opportunity” report it to the SEC at
  4. Do you understand the investment? A key motto of many successful investors is: never invest in something you don’t understand.
  5. Where can you turn for help?, (Financial Industry Regulatory Authority) or your states regulators at

To read a more fleshed out version of this list, log onto


Don’t Give Your Money to a DJ… Check Out that Broker!

Use the government website, BrokerCheck to research a broker you are considering using: it’s at It allows you to enter the name, company, and location of someone who wants to invest your money, and tells you:

  • Whether that person or firm is registered, as required by law to sell securities such as stocks, bonds, mutual funds and more, and to offer investment advice.
  • It gives you a snapshot of the broker’s employment history, including complaints.


Don’t Underestimate the Power of a Fake

The road to “dead broke” is paved with well-heeled impostors. The bigger the scheme, the greater the show of wealth a financial scoundrel may display. Investments that offer a too-good-to-be-true return often end up the subject of investigations and may even be detailed on an episode of American Greed.

One thread that seems common to investment scams is this: Investors receive monthly or quarterly statements that show a steady growth, as promised. In some cases, the broker deals with, or seems to deal with reputable banks – which adds to the deception. The statements give investors a false sense of security, which encourages them to invest more and possibly to get friends and family to invest as well. Dividends are paid on schedule… until they aren’t.

Anyone involved in an investment that is paying higher than average returns would be wise to do some checking before it’s too late.


Can Creditors Take Our Retirement Savings?

All the estate planning in the world won’t help if creditors eat away your wealth, according to the Estate Planning Brief, published by Thomson Reuters. Are your retirement assets in an employer–sponsored plan or IRAs? The answer affects how much of your assets are protected from creditor claims.

Let’s say your money is in an employer plan. Most qualified plans are protected from the claims of creditors even if you file bankruptcy. These are plans such as 401(k), 403(b), 457 plans, pension plans, and profit-sharing arrangements. What protects them? The Employee Retirement Income Security Act.

What about employer plans that are IRA-based? These include plans such as Simplified Employee Pensions (also called SEPs), or Savings Match Plans for Employees (SIMPLEs). These plans are also protected in bankruptcy, but there is uncertainty whether they would be protected outside of bankruptcy.

Or, perhaps your money is in personal IRAs. Outside of bankruptcy, your protection depends on the law in your state. In bankruptcy, creditor protection is based in federal law. Specifically, the Bankruptcy Abuse Prevention and Consumer Protection Act covers traditional and Roth IRAs, making them exempt from credit claims up to $1 million (adjustable for inflation).

That $1 million limit doesn’t apply when you roll amounts from other qualified plans into IRAs. Let’s say you have $3 million in a 401(k) plan. You roll it over into an IRA, including the earnings on your contributions. Generally, the entire amount continues to be protected from creditor claims in bankruptcy. This requires careful handling, including putting rolled over money into a separate IRA, rather than adding it to an existing one, to ensure you have creditor protection. Also, keep in mind that distributions are not protected.

Did you inherit an IRA? Unfortunately, IRAs that you inherit are not protected in bankruptcy. That’s because an heir is able to withdraw funds from an inherited IRA at any time without tax penalties.

If you’re concerned that your retirement savings may be subject to creditor claims, contact your financial professional who will be able to help you formulate the best strategy of protection from bankruptcy law and your state’s law.

What if your creditor is Uncle Sam? The IRS can levy your IRA if you owe them money. Typically, the IRS will go after other assets first, but you should know your IRA is not off limits. And to add insult to injury, the distributions levied will be taxable income to you. One small favor: If you are under 59 ½ you won’t be charged the 10% early distribution penalty.


Who’s That Email Really From?

If an ad or offer pops up and you are interested, check it out first. The Federal Trade Commission (FTC) says, if you aren’t sure of the company you’re dealing with, type the name of the company or product into a search engine, with terms like “review” or “complaint” or “scam.” If you find bad reviews, it’ll be up to you to decide if you should risk the purchase or not. The FTC says if the company offers no way to contact them, you’re better off to take your business elsewhere.


Teresa Ambord is a former accountant and Enrolled Agent with the IRS. Now she writes full time from her home, mostly for business, and about family when the inspiration strikes.

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