Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I'm in the process of switching jobs this early January....
I max out my IRA (wife and I) as well as only my 401k annually, and i've set my withholding to be around 90% of my first paycheck (so, about $5k), going towards 401k. That's because i'm thinking that i may not have an employer for a few months (in case of potentially being laid off soon...) and want to make sure i contribute as much as possible before that happens. Similarly, what i could do is reduce that % to 0, take the cash and max out my IRA instead.
Emergency fund is at about a year conservatively, before touching any of the brokerage accounts, so i think adding to the EF may not be the best use for the money....
I'm stuck between the choices, but maybe that's because they're so close?
Any thoughts?
So are you or are you not losing your job? You say you're switching jobs but then say you may be without a job for a few months.
IMO, I would continue to add to the emergency fund if there is a greater than average chance you will be without a job for a significant period of time and your spouse (if applicable) cannot support you on her own. If you want liquidity but with some investment gains, look to a money market fund at your local bank. You'll get a little bit of yield but can still access the money quickly if need be.
I'd add to the EF if you are potentially out of a job, but I'd also take the cash and add to my IRA if I were you. Tying money up in an employer 401k could be risky if you do get lair off. You have to either cash it in or roll over into new employers 401k I believe, and if new emplooyer doesn't habe that option, could be a problem.
I'd just as,soon keep any additional monies in my hands, not the employers. If they also go bust after lay offs, that could further spell trouble for your 401k.
I'd invest some as the previous poster said into a goid mma and into a Roth IRA of my choosing, but that is me.
Your results may vary, close cover before striking, do not iron while wearing, do not use in or near water, your mileage may vary, void where prohibited by law.
So are you or are you not losing your job? You say you're switching jobs but then say you may be without a job for a few months.
IMO, I would continue to add to the emergency fund if there is a greater than average chance you will be without a job for a significant period of time and your spouse (if applicable) cannot support you on her own. If you want liquidity but with some investment gains, look to a money market fund at your local bank. You'll get a little bit of yield but can still access the money quickly if need be.
hah
it's a bit of both i suppose....not sure which will come first.
I'm actively looking....but the company is sort of going belly up (among other personal issues) and I anticipate being laid off soon. Now, if i find something before that happens, great. If i get laid off before, i will probably just relax for a few months and narrow my search criteria to only the places i absolutely want to work....we'll see.
I'm not really sure if adding to the EF is the best idea. we have no mortgage and only about 3300 monthly expenses (including the Unemployment I'd receive). And my built up vacation hours that'll be paid out and the 2 weeks severance package is enough for 4-5 months of expenses. that's without touching any of our EF or Brokerage accounts.
Quote:
Originally Posted by galaxyhi
I agree with the previous poster to some degree.
I'd add to the EF if you are potentially out of a job, but I'd also take the cash and add to my IRA if I were you. Tying money up in an employer 401k could be risky if you do get lair off. You have to either cash it in or roll over into new employers 401k I believe, and if new emplooyer doesn't habe that option, could be a problem.
I'd just as,soon keep any additional monies in my hands, not the employers. If they also go bust after lay offs, that could further spell trouble for your 401k.
I'd invest some as the previous poster said into a goid mma and into a Roth IRA of my choosing, but that is me.
Your results may vary, close cover before striking, do not iron while wearing, do not use in or near water, your mileage may vary, void where prohibited by law.
Not sure what you mean about "Spell trouble for your 401k..." and "401k could be risky if you get laid off...". I have a 401k from my previous employer ~8 years ago, and it's just sitting there in vanguard growing. i didn't roll it over or anything and it's gone from 39k to 100k in about 8 years. I suspect this company's 401k (which is also with vanguard) will be the same. The money is already in there. i'm vested fully in S&P500 funds. nothing will happen to it if i'm laid off, leave, or get fired.
You might feel like you have a substantial emergency fund but when there is zero income coming in, trust me it goes FAST. And then what if a real, actual emergency happens that will necessitate a large outflow of money? Furnace goes out, you get into a car accident and are injured, etc. etc. While these are unlikely you have to prepare for the worst when the checks are no longer coming in.
But if your company goes belly up, you'll have the ability to file for unemployment benefits which will provide you with some income while you search. I would absolutely play it out if you can and then you'll have the ability to find the job you want vs. the job you need.
You might feel like you have a substantial emergency fund but when there is zero income coming in, trust me it goes FAST. And then what if a real, actual emergency happens that will necessitate a large outflow of money? Furnace goes out, you get into a car accident and are injured, etc. etc. While these are unlikely you have to prepare for the worst when the checks are no longer coming in.
But if your company goes belly up, you'll have the ability to file for unemployment benefits which will provide you with some income while you search. I would absolutely play it out if you can and then you'll have the ability to find the job you want vs. the job you need.
Thank you. Yes, i'm counting 1500 a month in unemployment in the equation. I'd get that if i'm laid off; (even if i quit...under the current toxic circumstances. lol)
I'm taking your advice and doing only 40% of the paycheck into 401k and the rest into the reserves
thank you.
Look at a ROTH to supplement your emergency fund. If you use it as a supplement be sure your investments are suitable for an EF and not retirement. A roth will let you take you contribution out without and penalty (not earnings). Thus you can get at your money and if the EF is not needed invest for retirement. Note their is a rule about having a roth over for 5 years for some of the benefits so if you do not have a ROTH open one with a dollar or two to start the five years.
Look at a ROTH to supplement your emergency fund. If you use it as a supplement be sure your investments are suitable for an EF and not retirement. A roth will let you take you contribution out without and penalty (not earnings). Thus you can get at your money and if the EF is not needed invest for retirement. Note their is a rule about having a roth over for 5 years for some of the benefits so if you do not have a ROTH open one with a dollar or two to start the five years.
Sounds like OP may be a high earner who couldn't qualify for the Roth.
I'm leery of using a Roth as an ER supplement. Roth monies are there for a reason and that's retirement. I like to keep everything separate so that I'm never tempted to dip into my retirement money unless is truly a life or death decision.
There are other somewhat safe places you could put your money into the market so that they would earn a bigger yield than a money market......bond funds, as an example. Munis, Treasury Bond Funds, inflation protected, bond index funds, etc. You're not going to make a killing but it's also (usually) better than cash or a money market fund. Just a few ideas. If you're not in a credit union they also typically pay a bit more yield in their accounts, look to them as well.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
