The new bankruptcy law that took effect Oct. 17, protects funds held in a qualified retirement plan from outside creditors. There's no limit on the amount you can shield from creditors.
If you subsequently roll over the funds to an IRA, you're still fully protected by the law. But there's a $1 million cap on regular IRA funds and the earnings accumulating within those accounts.
Strategy: Keep the funds in the qualified plan as long as you can. If you're leaving the company, roll over the payout to a separate IRA, rather than an existing IRA.
By segregating those assets from other IRA assets, you can maintain unlimited protection for as long as you're alive. It won't be a problem identifying the funds, no matter how much you accumulate in earnings, because they've always been kept in a separate IRA.
Note: In addition to the bankruptcy law, a landmark Supreme Court ruling earlier this year provided protection under the federal bankruptcy laws to traditional IRAs. (Rousey v. Jacoway)
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