My sister (mid-40s) called last night to tell me her DH is concerned he may lose his job at the end of the calendar year due to restructuring business units within his large company. She is a stay-at-home mom and so I asked her about their savings -- if they have enough emergency stash to pay the bills and feed the family for 8 months or more if it takes that long to find a new job. She thinks they realistically only have about 3 or 4 months of savings to pay the mortgage, insurance, etc.
She was thinking that her DH should stop contributing to his 401K over the next 6 or so months to beef up their emergency fund.
Which might be a good idea. But I was thinking that he should still contribute up to the match, which at his company is a 50% match on up to 6% of his salary. My rationale is:
- He could withdraw from his 401K all of this year's contributions and pay the 10% penalty and still come out ahead.
- He has some time to look for another job before the end of the calendar year (which a lot of folks don't get when they might be terminated).
- He might not lose his job at all and would have missed almost a year of contributions. His wife doesn't work, so he is the only retirement savings they have.
What would you advise your sister to do? She cannot work because their youngest is a disabled child that requires a lot of care.
She was thinking that her DH should stop contributing to his 401K over the next 6 or so months to beef up their emergency fund.
Which might be a good idea. But I was thinking that he should still contribute up to the match, which at his company is a 50% match on up to 6% of his salary. My rationale is:
- He could withdraw from his 401K all of this year's contributions and pay the 10% penalty and still come out ahead.
- He has some time to look for another job before the end of the calendar year (which a lot of folks don't get when they might be terminated).
- He might not lose his job at all and would have missed almost a year of contributions. His wife doesn't work, so he is the only retirement savings they have.
What would you advise your sister to do? She cannot work because their youngest is a disabled child that requires a lot of care.