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For retired seniors on fixed income, the recommendation tends to be between 1 and 3 years (primarily as a protection against bad economy, so one doesn't need to sell other assets emergently for unfavorable price; the assumption is that the economy usually tends to reasonably recover in 3 years). Not sure what I would tell a young person; I think it mostly depends on how far you can shrink your lifestyle, and what other resources you have, if temporarily not working.
For retired seniors on fixed income, the recommendation tends to be between 1 and 3 years (primarily as a protection against bad economy, so one doesn't need to sell other assets emergently for unfavorable price; the assumption is that the economy usually tends to reasonably recover in 3 years). Not sure what I would tell a young person; I think it mostly depends on how far you can shrink your lifestyle, and what other resources you have, if temporarily not working.
If you look at household net worth numbers for age 65+, you'd have to be at least in the 70th percentile to have enough wealth to be able to do that.
It's not the "bad economy", it's stock market corrections. It's why the conventional wisdom is to lighten up on stocks as you age. You can run into the whole sequencing problem where the market craters right as you're getting ready to retire. Imagine retiring in 2009 planning to live off your 401(k) portfolio that just corrected 40%.
My mother is 85 and in an assisted living place with severe dementia problems. I moved her portfolio completely out of the stock market. Sure, I left a big pile of money on the table doing that but the downside risk at age 85 with known expenses is much greater than any upside risk.
Another variable to consider is your states unemployment laws and your monthly expenses as a percentage of your income. I live in Massachusetts and have a decent gross salary. I save 50% of my net income and if I needed to cut expenses I could pay all of my needed bills and groceries for less than what I would get in unemployment. I'm also single with no kids, car or debt.
It kind of depends what your COBRA looks like. I was able to mostly do it in the Great Recession but my health insurance plan at the time was HSA with a $2,500 deductible and a very young group in the insurance pool. And Obama picked up 2/3 of my COBRA premium. In 2017, $1,000 per month for an individual COBRA payment isn't unusual. Even with the Massachusetts $740-ish maximum weekly benefit, you still have to pay taxes on it. Auto insurance ain't cheap. Homeowners insurance is pretty costly. Property taxes.
I was unemployed for 10 months recently. I only hit my emergency fund for $20K but I also zeroed out my household checking account and spent a fairly substantial tax refund. I'm busily putting all that money back now.
To think and really look over finances, i would say a monthly car note, daycare when someone is not working, the extras you spend on luxuries , and the need to live a plush lifestyle , should all be placed in a rainy day fund.
You work hard, and should spoil yourself once in a while, but burning money away is a trait many people should give up!
I have suffered hard times in the past, and took a big loss selling off stuff, and taking money out of investments at a wrong time. Liquid assets , even a small bank roll stashed at home , is a real thing.
just trying to figure how ya is anybody able to save so much at one time. Everybody making 100k a year or something..
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