Federal retirement protection
Retirement accounts receive strong protection in bankruptcy under federal law. This protection applies regardless of which state you live in and regardless of whether your state has opted out of federal exemptions.
ERISA-qualified plans (unlimited protection)
401(k)s, 403(b)s, defined benefit pensions, profit-sharing plans, and other plans that qualify under ERISA are protected without any dollar limit. This protection comes from 11 U.S.C. § 522(b)(3)(C) and from the Supreme Court's decision in Patterson v. Shumate, 504 U.S. 753 (1992).
The rationale is simple: these funds are held in trust for retirement and are subject to anti-alienation provisions. They are not available to the debtor's creditors outside of bankruptcy, so they should not be available to the trustee inside bankruptcy.
IRAs (capped protection)
Traditional IRAs and Roth IRAs are protected up to a combined limit of approximately $1,512,350 (as of 2024, adjusted every 3 years). This cap was established by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 and codified at 11 U.S.C. § 522(n).
Rollover IRAs that originated from an ERISA-qualified plan (like a 401(k) rolled into an IRA) receive unlimited protection, even though they are now held in an IRA.
Retirement account exemption summary
| Account Type | Protection Level | Authority |
|---|---|---|
| 401(k), 403(b), pension | Unlimited | § 522(b)(3)(C); Patterson v. Shumate |
| Traditional/Roth IRA | ~$1,512,350 | § 522(n) |
| SEP-IRA, SIMPLE IRA | Unlimited (employer-established) | § 522(b)(3)(C) |
| Rollover IRA (from 401k) | Unlimited | Rousey v. Jacoway, 544 U.S. 320 (2005) |
| Government pension | Unlimited | § 522(b)(3)(C) |
| Inherited IRA | Not protected | Clark v. Rameker, 573 U.S. 122 (2014) |
Inherited IRAs are NOT protected. In Clark v. Rameker, 573 U.S. 122 (2014), the Supreme Court unanimously held that inherited IRAs are not "retirement funds" within the meaning of the Bankruptcy Code. If you inherited an IRA, it is not exempt and the trustee can claim it.
Do not cash out retirement to pay debts
One of the most common financial mistakes before filing bankruptcy is cashing out retirement accounts to pay debts that would have been discharged. Your 401(k) is protected in bankruptcy. Your credit card debt is dischargeable. If you cash out the 401(k) to pay the credit cards, you lose protected money to pay debts you could have eliminated for free. See why you should never cash out retirement before bankruptcy.
Retirement savings are almost always safe in bankruptcy. The combination of ERISA protection and the generous IRA cap means that for the vast majority of filers, every dollar of retirement savings survives bankruptcy untouched.