Don't let a financial emergency derail your retirement
Use these tips to help keep goals on track when your situation changes.
It's hard to plan for the unexpected, whether it's a lost job, a sudden illness or an emergency home repair. But there are steps you can take to help safeguard your retirement savings, even when finances change. Steps can inlcude.
Set aside at least three to six months of living expenses that you can tap in an emergency.
To get started, use our emergency fund financial calculator to estimate how much you may need to save.
Make the most of your spouse's resources.
Say you're laid off: Your retirement plan contributions stop along with your paychecks. If you're married and can afford it, your spouse might increase his or her retirement contributions to pick up the slack. Your spouse also may be able to make Individual Retirement Account contributions on your behalf. Then once you land a new job, you may be able to devote an even larger share of your paycheck to retirement contributions and make up lost ground.
Avoid cashing out your retirement account.
Losing a job is probably the most severe financial setback you or your retirement savings will ever face. Not only do you lose a steady paycheck, but you no longer have access to automatic salary deferrals and matching contributions from your organization, if available.
In that situation, cashing out your retirement accounts is the worst thing you can do, says Michael J. Levine, investment advisor with the Levine Group, Inc., in Brentwood, Tenn. "You're not only paying an early-withdrawal penalty on that hardship withdrawal, but you're also missing out on the future growth," he explains. If you really need cash, look first to your emergency fund.
A dramatic change in your financial situation can be unsettling. Let a financial professional help you make a plan that may keep your retirement goals on track.
Michael J. Levine the Levine Group, Inc. are not affiliated with any company of the Principal Financial Group
Insurance products and plan administrative services are provided by Principal Life Insurance Company. Securities are offered through Princor Financial Services Corporation, 1-800-547-7754, member SIPC and/or independent broker dealers. Securities sold by a Princor® Registered Representative are offered through Princor. Princor and Principal Life are members of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.