The Supreme Court on Monday ruled that creditors may not seize Individual Retirement Accounts when people file for bankruptcy, giving protection to a nest egg relied upon by millions of Americans.
The unanimous decision sides with a bankrupt Arkansas couple fighting to keep more than $55,000 in retirement savings. As a result, IRAs now join pensions, 401(k)s, Social Security and other benefits tied to age, illness or disability that are afforded protection under bankruptcy law.
IRAs should not be treated any differently because the benefits are tied to people's age, the court said.
"The ruling is particularly interesting because it comes on the heels of action in Congress and at the White on new bankruptcy rules that make it much harder for individuals to protect certain assets in bankruptcy," reports CBS News Legal Analyst Andrew Cohen. "This decision tacks in the opposite direction, and it is a huge victory for individuals and a big defeat for big corporations."
IRAs allow most investors to contribute up to $4,000 in earned income annually to a fund that grows tax-free until withdrawals. It is the only retirement plan available to the self-employed and small business owners and is typically used by workers between jobs, according to AARP.
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