How to Protect My IRA

An Individual Retirement Account (IRA) is designed to supplement federal income sources once you retire. Theoretically speaking, a younger person can recover from losing IRA assets, contributing to the IRA over time and using investment strategies to increase returns. It doesn't matter what your age is or how many years before retirement you have, if protecting your IRA assets is important to you, consider the different areas that can hurt your IRA.

Protection Against Creditors

• 1

  Investigate the bankruptcy and creditor protection for IRAs in your state of residence. IRAs are protected from bankruptcy for at least $1 million, more in some jurisdictions. Not all states offer protection against creditors who have a judgment against you. You can obtain your state regulations by speaking with a bankruptcy attorney or going to the courthouse resource library.

• 2

  Talk to your 401k plan administrator if you have an employer-sponsored 401k plan and your IRA is a 401k rollover. The IRS allows you to roll over previous employer plan assets into your present employer if the plan administrator allows the "roll in." Most states exempt all 401k assets completely from bankruptcy and judgment claims. Obtain and complete any paperwork required to complete the rollover. This may not increase bankruptcy protection but may increase protection against creditor claims in lawsuits.

• 3

  Purchase liability insurance that protects you in the event you are sued. This is especially important in states where there is little protection for IRA assets or your coverage needs exceed the $1 million limit.

Protection Against Risk

• 1

  Look at the investment options for your IRA account. The IRS allows a plethora of investment options including bank investments, brokerage investments, real estate and certain precious metals. Bank savings are considered conservative, while other investment options hold various levels of risk depending on the specifics of the investment.

• 2

  Research the risk level in your existing portfolio by using a third-party research site and journals such as Yahoo Finance, Morning Star and MSN Money. Look for average returns over the past 10 years and interest rate fluctuations and compare returns to the inflation rate. Inflation risk is the inability of your current assets to keep up with increases in the cost of living. Your money may remain stable in interest-fixed investments compared to high-risk international stock investments that fluctuate dramatically.

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  Choose investments that don't fluctuate excessively but seem to consistently keep up with inflation. Conservative investors choose from time certifications or fixed annuities but may also look for some portfolio holdings in moderate funds or large capitalization stocks.

• 4

  Liquidate high-risk investments and replace them with more moderate or conservative choices. Most advisers recommend keeping a larger percentage of funds liquid or in highly conservative investments closer to retirement while having a small percentage in moderate risk investments.