Received a great question last night from the contact us form, so we thought it was worthy of a quick post.
Question: Would a mutual fund give access to cash and what would the penalties be to pull money out if needed?
Answer: First of all, thanks for sending this question our way. Let’s breakdown this question. Mutual funds are a type of investment. Mutual funds are an option of where you can put your cash. Similar to a bank account, individual stock, exchange traded fund (ETF), index fund, and so on. Depending on where these mutual funds are held will determine whether you would have a penalty when withdrawing money in the event you need cash.
You have two options; you can open a non-qualified investment account or a qualified investment account. The difference being a qualified account is a retirement account. If you pull money out of a retirement account, without a qualifying event, you will receive a penalty tax. Therefore, if you are looking for an account to invest in mutual funds (or stocks, ETF’s, index funds, etc.) and want to have access to the money without penalty taxes, you can find these advantages in a non-qualified investment account. Accounts where you can withdraw money without penalty tax are often referred to as “liquid” accounts. We find these accounts to be beneficial to our clients who are looking for additional growth of their money (compared to a savings or checking account) and also have the quick access to cash if needed.
This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.