Retirement plans can provide simple but effective asset protection.
Federal law (ERISA) protects 401ks from lawsuits. If you get sued and lose, the judgment creditor cannot get to your 401k.
California law doesn’t give IRAs the same federal ERISA protection as 401ks. Under California law, IRAs are exempt from judgment creditors to the extent the account is necessary to support you and your dependents when you retire. A judge will determine that amount on a case by case basis. However, IRAs that are rolled over from 401ks are 100% exempt from judgment creditors.
ERISA exempts 401ks from bankruptcy. IRAs are exempt in bankruptcy up to $1 million.