Today’s Smart Money Question:
(Click the featured times below to jump forward in the episode)
Here Are Just A Handful Of Things You’ll Learn:
We get a lot of fascinating money questions from our clients. Today we’re sharing some common ones that might help you.
One of our clients has been very aggressive in funding their 401(k), and they’ve been maxing it out. They have close to a couple million in the account, but they are only 54 and have a major home project that has to be done.
They only have about $5,000 in the bank and wanted to know if they should take money out of the 401k and take the 10% ordinary income tax hit.
Maxing out your 401(k), especially if you can afford it, is great. If you’re getting a match, it can be a great accumulation vehicle. But this is only great if you’ve done a budget.
If you don’t have an emergency fund and money outside the 401(k), especially under the age of 59.5, then your money is tied up and you can’t get to it easily.
Our advice is this: Don’t have your 401(k) as your only investment vehicle. You’ll always need money outside of that. An emergency fund, even though it doesn’t earn much, is still an investment vehicle.
We always ask our clients, how much cash do you have on hand? What is your cash flow like? Some clients want three to six months. Others want one to two years of cash available.
Instead of tapping into your 401k, use your emergency fund or a home equity line of credit.
On today’s show, we’ll also talk about risk, rate of return and cost of living adjustments. Listen to the full episode or use the timestamps below to jump to a specific section.
4:43 – Aggressive 401(k)s
7:59 – Other options
11:00 – Know where your money is
13:51 – Risk
15:29 – Rate of return
16:27 – COLA
“Be disciplined in what you’re doing. The results on the back end can be phenomenal if we stay disciplined.“
-Matt Hausman
Additional Podcast Episodes:
- Mid-Year Financial Review Checklist
- Should You Pay Off Debt with a 401(k) Loan?
- What to Know About Accumulation and Decumulation
Do You Have A Smart Money Question?
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The host: Matt Hausman – Contact – Resources – Call: 610-719-3003
