Retirement Accounts
What does it mean
Retirement Accounts represent the combined total of dollars within all retirement purpose accounts such as 401Ks, IRAs, or SEPs (amongst others). Retirement Accounts are a frequent item found on a personal financial statement.
Why does it matter
Understanding Retirement Accounts is important mainly for what these accounts DO NOT readily provide. Unlike Non-Retirement Marketable Securities which can be a secondary source of liquidity or collateral, Retirement Accounts are not. If the individual is less than 59.5 years old, any funds received would be subject to tax and/or penalties (the penalties go away if the individual is more than 59.5 years old). Additionally, retirement accounts are not allowed to be pledged as collateral on a loan; so a creditor cannot force a individual to access their retirement accounts, and in bankruptcy, most retirement accounts are exempt as well (so there goes that option too :). Don’t take this as saying retirement account balances should be completely disregarded though. Retirement Accounts are still an asset owned by the individual, and they can still choose to access them, but since these types of assets are insulated from creditors, it takes the owner needing to take the initiative for it to actually happen.
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