Thursday, April 30, 2009

Financial Battle: Emergency Fund vs. Retirement Savings vs. College Accounts

Turning 50 has made me think about how I want to live the next 50 years. And that thought process has sparked a fiscal battle between the competing goals of retirement savings, emergency fund and college savings accounts.

After some thought, I ordered my priorities:

1. Emergency Fund: This account will be my No 1 priority for the next six months. The goal is to build the account until I have enough savings to cover living expenses for three months.

2. College Savings: With teenage and tweenage kids, building an education fund is another top priority.

3. Retirement Savings: I don't plan to retire. But from about age 70 and on, I would like to run a small business and that will require capital. A robust retirement account will provide start-up capital and flexibility for me to pick and choose my clients

Over the next six months, I will experiment with strategies and options for building those accounts. I am curious about your goals and strategies.


Anonymous said...

While you may not plan to retire, a medical condition in your age might force you to retire! Make sure you keep that in consideration. As much as we all would like to think we are invincible, you never know whether you will get cancer/Alzheimer's/arthritis/ etc and be derailed from working. My grandmother also has no plans to retire, but I know when she has medical problems, her kids will fund her unplanned "retirement" so I am sure your kids would rather take out loans for college and have you save in your IRA! Just a thought.

kath said...

My list is prioritized a little differently than yours, although I have the same goals (and I'm turning 50 this year too!).
1. Rebuild our emergency fund for 6 months (having a 6 month fund has helped my self-employed household over this past winter but now it's gone, gone, gone)
2. Retirement. My hubby is self employed and I am currently an unpaid full-time employee. My plan is to substitute teach part time a few days a week to save some cash in the retirement account and pay off a few bills.
3. Education funding. Right now my daughter goes to a Catholic high school ( that's right, KA-CHING!). I am hoping to be able to contribute at least what I pay for tuition now for her college tuition. We have never been in a position to be able to pay for college, although we did help as much as we could with our sons when they went to college.

Anonymous said...

As I suffer from chronic pain, my priority is to make my money work as hard as it can. I do not know when I'll be laid out, so need a strong pillow to protect me from those down times.

Right now I'm re-building an emergency fund. I want my fund to be able to last for a year. It's going to take a while as I'm only on half pay, but I'm going to try as hard as I can.

While I'm doing that, I'm reading as much as I can about different types of investments and savings so I can build up a strong and diverse portfolio.

Joyful Abode said...

Our goals are a tad different from yours.

1. Emergency fund... this is almost done (like 2 more months). We'll have funds for about 5 months with no income, I believe.

2. Retirement. We are 25 and have BIG GOALS for our "golden years"... we're talking airplanes (husband is a pilot), horses, big house, entertaining guests, travel. So we live VERY frugally now, and this is ongoing savings.

3. Saving for a "new to us" car. Ours is a 1996 jeep that needs to be replaced before we start a family. We're buying late-model used, without taking out a loan.

4. Saving for a someday house. For now, we're renting since we're moving so often (husband in navy) but someday we'll settle down and we'll want a HUGE downpayment.

=^..^= Kitty =^..^= said...

Dear FD,
Like you, I have no plans to retire, but I'm still saving for retirement.

I'm about to be 62 and my very basic plan is to work until I'm 70. That's just 8 years. I don't plan to sign up for Social Security until I'm 69-1/2. Although my 401k savings are down 47%, if I continue to live frugally, I will have more money to spend in retirement than I've ever had in my life. Optimism is key to my plan. I figure if I die at 80, that'll be just fine! If not, I shall become a ward of the state as I am the last of my family. I'll probably be kookie by that time anyway and won't know what's going on!!!

Planning is great, but one must still play the hand one is dealt.

Best regards!