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Thread: “Liquid” assets

  1. #1
    Senior Member iris lilies's Avatar
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    “Liquid” assets

    DH and I are having an argument about terminology.


    I say that any of our financial instrumentstruments are liquid. He says that anything not in cash is not liquid. Probably both of us are making these definitions too rigid. But...

    Specifically, are talking about 401K investments that our friend has, in the context of her desire to buy a house.

    So my question: would you call 401K funds belonging to someone 67 years old to be “liquid “ assets?

  2. #2
    Moderator Float On's Avatar
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    If there is no loss in value and you can get access quickly, that's liquid right? For me because I'm only 51 my 401K is not liquid. I couldn't get access to the full amount, I'd lose a lot in penalties.
    Float On: My "Happy Place" is on my little kayak in the coves of Table Rock Lake.

  3. #3
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    Yes and no?
    They have to pay the taxes on them if they pull them out. So the value is not the same as the number on the page.
    It's more liquid than real estate.
    Why is the idea of liquidity important in this discussion? Wouldn't one be more concerned about what effect pulling out the money from the 401k (or IRA) would have on the person's future retirement years?

    I could sell stuff in my IRA and get cash within a few days. So that is more liquid than many things, but not like writing a check, and if she is buying a house, bank may not consider it liquid because they may discourage her cleaning out the 401k. I have taken cash out of a 401k to buy a house, but I had to do it through the benefits people--I don't know what rules her 401k has.

  4. #4
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    I would say they are as liquid as the plan administrator is efficient in executing the needed transactions.

  5. #5
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    Since your friend is 67 no reason for her not to spend some of her 401k and there is no penalty at her age so I would consider them liquid.

  6. #6
    Senior Member iris lilies's Avatar
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    Quote Originally Posted by Tybee View Post
    Yes and no?
    They have to pay the taxes on them if they pull them out. So the value is not the same as the number on the page.
    It's more liquid than real estate.
    Why is the idea of liquidity important in this discussion? Wouldn't one be more concerned about what effect pulling out the money from the 401k (or IRA) would have on the person's future retirement years?

    I could sell stuff in my IRA and get cash within a few days. So that is more liquid than many things, but not like writing a check, and if she is buying a house, bank may not consider it liquid because they may discourage her cleaning out the 401k. I have taken cash out of a 401k to buy a house, but I had to do it through the benefits people--I don't know what rules her 401k has.
    The idea and definition of liquidity is important because it is a marital arguement and I have to be right!

    Your answer is more measured and resembles’s DH’s answer. He wants her to consider tax liabilities. Sure
    I agree, but she is acting like she has no money when in fact she has $300,000 in 401k assets.

  7. #7
    Senior Member rosarugosa's Avatar
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    I have 4 boxes of Black Box Cabernet in my cellar - it doesn't get any more liquid than that!

  8. #8
    Senior Member iris lilies's Avatar
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    Haha yeah, baby!
    Quote Originally Posted by rosarugosa View Post
    I have 4 boxes of Black Box Cabernet in my cellar - it doesn't get any more liquid than that!

  9. #9
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    Looked it up....

    A liquid asset is cash on hand or an asset that can be readily converted to cash. An asset that can readily be converted into cash is similar to cash itself because the asset can be sold with little impact on its value.

  10. #10
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    For me liquid is I can have it in hand today. It takes several days to get your hands on investment monies. We keep about $135k liquid. The rest would take up to a week to get in our hands.

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