401ks and Bankruptcy

I have heard a lot of people talking recently about how they will raid their 401k and other retirement accounts if they lose a job, or are otherwise unable to work.  While I think that kind of self reliance is an admirable personal trait of America, it is one that comes with a lot of costs to those who exercise it.  The reason for this is because many of the courts in the US will exempt your retirement accounts from your bankruptcy filing.  As a result of this system, many Americans wait far too long before they declare bankruptcy, and the opportunity costs of prematurely raiding your retirement accounts can reach into the hundreds of thousands, if not millions of dollars.  This is why I think it is a good idea for those who are at the stage of looking at raiding their retirement accounts before filing bankruptcy to talk to a qualified attorney.  In many, but not all, cases this consultation can save you many times the amount of money because you won’t wait too long to declare bankruptcy and lose out on the compound interest and tax favored advantages that your retirement accounts offer you.

Disclaimer: I am not an attorney, and this is not investment advice.  The choices you make in your life are yours, but I do believe that you should be as well informed on the options that you have as can possibly be.