Personal savings can be a source of income for you during retirement, but may not offer the tax advantages or growth potential of some other investments. The advantage of personal savings is that it can provide you with cash to help meet day-to-day financial needs.
How much should you save?
There isn’t a magic number, but think about building up enough savings to last through three to six months of unemployment. In addition to giving you a cushion should you become unable to work, it can also help you through emergencies.
If you have a savings account to help you through an emergency, such as fixing your heater or your car, you can take money from your savings without penalty. Many retirement specific accounts penalize you for withdrawing funds before a certain age.
And if you're considering taking a loan from your employer-sponsored retirement plan to get extra or emergency money, you could be missing out on potential growth opportunities. Understand the costs of taking a loan from a 401(k) or other retirement plan before you tap into your retirement savings.