Expert guest contributor Daniel Chung dropped by Harvey and Shelley’s show this week with excellent information for our listeners. During his August 17th segment, Daniel discussed 401(k)s and other venues people can look at for investing when it comes to retirement.
Harvey asks Daniel if you should max out your 401(k) when you get a chance. Daniel reveals that you are only allowed to put up to $17,500 a year into your plan. Many employers match a certain percentage of that as well, such as 3%, according to Daniel. He also warns our listeners to be careful as there are penalties for withdrawing funds from the plan before they turn 59 and a half.
If you need money in an emergency situation, Daniel says the worst place to withdraw those funds from is your 401(k) plan. He also advises that our listeners talk with an advisor on planning for the future to see if they should be maxing out their 401(k) or what the best avenue is for them.
A 401(k) locks up your money, Daniel says. It’s hard to unlock if you’re under 59 and a half years of age. He reveals, though, that there are other financial investment vehicles to consider, such as putting your money into a savings account. Ideally, you should have six months to a year of emergency reserves such as living expenses that you can just dip into right away.
Daniel also says that you can take out of the cash value on your life insurance. When you put money towards your life insurance policy, it creates a cash value for that policy. You can take a loan out of there without worrying about any incurring penalties.
Daniel also warns our listeners about estate taxes and to think about gifting your assets to beneficiaries. You are allowed to gift up to $14,000 per beneficiary, up to $5.3 million in total, and it could be anybody, not just immediate relatives. If you have the assets to do such, Daniel encourages you to proceed as when you die, the IRS will charge an estate tax and take a chunk of those assets away.
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