IRA Liability Limits

[00:00:00] Speaker B: Thank you for tuning in to Investment Insight presented by McKay Wealth Advisory. My name is Hayden Proffitt. Joining us today, we have Brent McKay. Brent, a little bit of liability protection inside of an IRA. Can you hit on that? Sure. [00:00:10] Speaker A: So IRAs and 401ks are pretty neat vehicles because a lot of people don't realize that you get increased liability protection in a 401k and IRA above some other types of investments. So right now, of course, if you have money inside of a 401k, you get unlimited liability protection for bankruptcy. The other part of that is if you roll that money from a 401k to an IRA, that money still stays protected and is unlimited under federal law. If you put money into an IRA in general, the limit is $1,711,975 in 2025. And so that's the limit of you could have up to that amount of money in a Roth IRA or a traditional IRA and be legally protected from bankruptcy or some kind of litigation. Now, this does not apply for inherited IRAs. So one of the big things people don't realize is while you're alive, your 401k, your IRA is protected. However, when that does pass on to the next generation, to your kids, you don't get that same protection. So if you notice, for instance, that your kids are maybe seeing some kind of pending situation, you may want to consider using a trust or another vehicle in conjunction, you know, with that IRA to provide some liability protection, because it does go away for that. But there are a lot of really cool protections on IRAs and 401ks. And like we tell most business owners, hey, you know, don't just invest in your business. Also set some money aside, you know, in a retirement vehicle like a 401k, an IRA, or a SEP or a simple or, you know, 403B 457, depending upon your persuasion, what you're doing so that you have that money there set aside if everything goes bad to where you can still, you know, restart your life and still have some retirement. [00:01:48] Speaker B: Yeah. And another thing is just to increase your savings rate. Right. This is just another benefit of increasing your savings rate and lowering your taxes. Yep, for sure. Thanks for talking to us about this today. Thank you for tuning in. Hope you have a great day.