Protections for Retirement Income
The reason seniors can sometimes ignore their debts is that Congress protects certain types of retirement income. Even when you owe a debt collection agency, you have a legal right to keep some of your income. Collection agencies often attempt to collect debts hoping seniors don’t know of these rights.
The Employee Retirement Income Security Act (ERISA) is one such protection. The act establishes a minimum amount of retirement and health plan funds that someone who retired from a private industry job must receive. Therefore, ERISA protects Social Security pensions and retirement funds within certain limits, in addition to guaranteeing the payment of specific benefits through a federally-funded organization called the Pension Benefit Guaranty Corporation (PBBC).
Learn more about ERISA and how it applies to your retirement income here.
Note that its protection doesn’t extend to government retirement plans, church plans, or plans established to satisfy workers compensation, disability, or unemployment benefits. However, veterans benefits are another federally protected source of retirement income, secured by certain laws like Concurrent Retirement and Disability Pay (CRDP), which protects a retired veteran’s ability to take out disability, as well as Veterans Affairs compensation.
Individual retirement accounts (IRAs) are another significant source of retirement income that some states protect from being seized as assets in lawsuits from debt collectors. Each state has its own special conditions, but the states to watch out for are those that offer zero or only partial exemptions for IRA accounts. These include California, Maine, and Nebraska for traditional IRAs, and California, Maine, Nebraska, Georgia, Mississippi, Montana, and West Virginia for Roth IRAs.
Remember that it isn’t the end of the world if a debt collector sues you. Your retirement income may be protected by law, depending on the type of income it is, as well as special stipulations in your state’s retirement laws.