retirement

Protect my 401(k) and IRA from creditors

Liz WestonDear Liz,
I may be getting married. I'm 63, and he's 62. I need to protect my 401(k) and IRA from creditors because I can't re-earn that money! If I marry and my husband has medical bills not covered by his insurance at work, is my retirement nest egg at risk?

Thank you.
-- Sandy

Dear Sandy,
If this is the only issue keeping you away from wedded bliss, then best wishes on your nuptials!

Money in 401(k) plans and other workplace retirement plans is protected from creditors. If medical bills should drive you into bankruptcy, those sums would be safe. So, too, would savings in a traditional or Roth IRA, up to a federal limit that's currently over $1.2 million per person.

You're smart to be concerned about the potential impact of uncovered medical bills, even though your husband has health insurance. Illness or medical bills are a factor in most bankruptcies, and the vast majority of those bankrupted by medical bills had health insurance at the beginning of their illness or disability, according to a Harvard University study.

One piece of good news for those with massive medical bills is that health insurers are no longer allowed to put a lifetime dollar limit on most of the benefits you receive. The Affordable Care Act, also known as Obamacare, abolished annual limits as well, starting this year.

Your risk of medical bankruptcy doesn't end once you qualify for Medicare, the government health insurance plan for people 65 and over. Out-of-pocket expenses such as co-pays can add up, to the point where the Employee Benefit Research Institute has calculated that a 65-year-old woman in 2013 would need to have saved $86,000, while a man the same age would need $65,000, to have a 50 percent chance of having enough to cover retirement health expenses. If you wanted to increase your odds to 90 percent, you would need to save $139,000 and your husband-to-be, $122,000.

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