hard · Certified Financial Planner General Principles
The Holm household (single, age 56) has just experienced a total job loss. They present with $3,600 in cash against $7,200 in monthly nondiscretionary expenses, a 24,000 credit card balance at 22%, and an $180,000 pre-tax 401(k). Holm asks if they should immediately roll the 401(k) to an IRA to access a wider range of recovery-oriented investments.
According to the CFP Mindset hierarchy, what is the most appropriate next step?
- Gather additional qualitative and quantitative data to clarify Holm's liquidity needs and overall financial goals.
- Decline the engagement due to the immediate cash flow crisis and high-interest debt exceeding the planner's scope.
- Recommend the rollover to capitalize on the 2026 IRA contribution limits and diversification benefits.
- Advise Holm to maintain the 401(k) balance to preserve the option for penalty-free distributions under the age 55 separation-from-service rule.
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