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Saving for Emergencies & Retirement all at once?

December 29th, 2007 at 07:17 pm

It has been very difficult and frustrating starting over, knowing exactly where we need to be as far as saving, giving, and spending having studied financial books, websites and these boards for years, and realizing how very S-L-O-W it will be to get to that place we want to be.

On that note, as I look over our finances and all of the many directions our spending plan is pulling us, I am seriously considering splitting my monthly EF money (that currently goes to ING) so that 50% of it will go to my Roth IRA. The poor Roth has not had a penny added for the last 3 years while I was in school, and I am not getting any younger. My husband does not even have a retirement account of any kind so I am definitely feeling like I better get started saving something.

If worst case came about I could always take out my contributions from the Roth without penalty, but I would never do that unless it was the absolute last option. I would still be contributing half of the EF money to my ING that is available more easily if it is ever needed so I feel like this is a good plan. Hopefully, both the ING EF and the Roth will continue to grow with no misfortunes befalling us!

8 Responses to “Saving for Emergencies & Retirement all at once?”

  1. mom-sense Says:

    I can empathize ... we were doing well but had a spurt of unemployment which lead to expensive COBRA insurance and $9,800 debt (for nothing frivolous: real estate taxes, parochial school tuition, etc.) We do have a savings account, but have neglected our retirement and college savings for awhile. I'm wondering: How do I eradicate the debt we accumulated? How do I plan to pay for all of the expenses we couldn't cover (we did get discounted tuition though for the kids), AND save for retirement and college? We have quite a few kids and at this point I'm wondering about prepaid tuition at a community college (at least giving them all AAs) I am though putting 6% into DH's 401(k) and 4% into my IRA. So you are not alone ... how long will your DH be in school and does he have tuition reimbursement?

  2. MarianneJ Says:

    Thanks for the comment, mom-sense.

    We are not sure exactly how long my DH will be in school. I am hoping no longer than 2 years if he can take summer classes, but it may be 3 years. He is going back to be a HS teacher and has some classes already but not alot, and unfortunately no tuition reimbursement. The only semi-good news is that because we made so little money last year and this year he should be able to get grants instead of loans for Spring 2008 as well as Fall08/Spring09 since they go by your tax return and our AGI on the return coming up will be rather paltry.

    If I had to do it again I would absolutely go to county college for the first 2 years. I can not get over the difference in price between county college and state university. I just graduated county college and the price per credit was about $80/credit. My DH will be going to the state university and the price per credit is quadruple that!!! Also, in NJ they now offer free tuition to any county college for HS seniors who graduate with A's and B's (not sure of the exact specifications but it is fairly broad). Like I said if I had to do it again I would not hesitate to take advantage of county college.

  3. Englishteacher Says:

    EF vs. retirement is a tough call. It really depends on how low your EF is. Best wishes.

  4. Broken Arrow Says:

    If push comes to shove, I would say build up the emergency fund first. You could save up a baby one first. 1k, the Dave Ramsey way.

    A possible compromise could be HSA, if you qualify for it. You'll have to do some more digging to see if you qualify, but if you do, it'll be tax-sheltered, AND, you can draw it only any time to cover medical expenses, emergency or not.

  5. baselle Says:

    This is absolutely perfect. Fund your Roth as completely as you can; anything above 5K goes to your ING EF.

    You can withdraw the money you put into the Roth at any time (the money the Roth earns you can't), so you can use it as an EF but since it earmarked for retirement, you won't dip into it for frivolous reasons.

  6. monkeymama Says:

    Agreed. I would open a cash account somewhere as an IRA and work on the $5k. Win-win. You would then be building retirement and less likely to touch it in emergency (hopefully. Since it would be a little harder to get at).

    I have some cash in a CD in an IRA for this very reason. (But you can later switch it to stocks and let it grow tax free when things are better. Which is why it's good just to get it in there. Ideally down the road you will have more money to tax shelter and you will be glad you put it in when you can).

    I am very all or nothing and prefer to do one thing at a time. But I had a large retirement contribution last year at work, from my employer. So I just did efund. For this year I have been considering trying to put $10k in ROTHs. Doubt I'll make it but thinking of putting a good few thousand in a cash fund ROTH as a supplement to my e-fund. Just pure accessible money market cash... Plus I don't want to give up some IRA contribution opportunity this year. So this seems like the best solution. I wish I had more cash, but I need to focus more on retirement. There's the solution then.

    HSAa are complex, high-fee, and lousy returns, if you ask me. BUT in your situation it may work too. They should be getting better with time. Just to point out you can pretty much open a ROTH anywhere. Like Ing and the like, just like a cash fund, but it will be designated as a ROTH. I think overall a ROTH is a better bet.

  7. terri77 Says:

    How much are you saving per month? I guess I would look at how long it would take me to build up my emergency fund if I split the funds between EF and Roth.

  8. MarianneJ Says:

    I have been putting $400/month into my EF at ING since I began my job in mid-October. If I split the money between the Roth and ING then each one would get $200/month. I am sad that I won't be able to max out the Roth...but I will continue to try as far as putting any survey $ and gifts, etc toward it. I would probably split that kind of "found money" between the 2 accounts as well.

    I do not have the option of an HSA as my employer does not offer it. I have been waiting for it to be a viable option in NJ since the President signed it into law back in 2003, but unfortunately this state I live in is the absolute WORST for many things and health care is one of them! Frown

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