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Financial Planning / Foolish 401(k)s


Subject:  Re: Emergency Savings vs. Maximizing 401K Contri Date:  10/9/2002  7:06 AM
Author:  BookmFool Number:  15389 of 26254

Greetings jsuomi:
Presently, I only have ~1 month of my monthly salary saved. With today's economy, I'd feel more comfortable with 6 months on hand.

And IMHO, what one is comfortable with is most important. I've read articles that discuss having as much as 6 months of living expenses stashed away, so that's not at all excessive. But that is certainly on the maximum end of the scale. The average seems to be around 3 months, from thinking of all that I've seen discussed. But again, if 6 months lets you breath easier, then that should be your goal.

Decreasing ones regular 401k contribution is a subject I'm hearing more often as of late. Not wanting to contribute to poor performing mutual funds (or fund) makes sense. But being that you're contributing to an index fund (and not one of the better ones IMHO), you're betting against the market(or the S&P500), after it has already lost over 40% or so, in the last 2-plus years. Because I'm DCAing (dollar cost averaging) with my contributions, the price that I'm buying my fund shares at in this bear market will be worth that much more when I need to redeem them a few decades from now. I consider myself thrifty, so I don't mind buying when something's on sale (SEE: buying LOW; selling high).

I hope the above makes some sense. Good luck with your decision though.

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