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Advantages of Individual Retirement Accounts

Motley Fool describes a bunch of reasons to have an IRA, chief among them that you can dump stocks at a tidy profit without fretting over the capital gains tax bite. I never knew about this one, though:

2. Creditor protection
When the economy was booming, few people thought about the protection that IRAs provide against creditors. But now, anything that can protect against debt collectors has gotten new attention.

Employer-sponsored retirement plans like 401(k)s have traditionally had strong protection from creditors, but many states didn’t offer the same protection on IRAs. That changed in 2005, when federal law added IRAs to the list of protected assets in bankruptcy, up to $1 million.

Although the bankruptcy laws don’t apply to all debts, they provide a useful weapon against creditors — as well as a further incentive to contribute to IRAs, and keep the money there even during hard times.

The article also notes that IRAs often aren’t counted against families by colleges when calculating financial aid.

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Tom Mangan posted at 11:19 pm January 12th, 2009 |

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