Unemployed – where should we access funds from first?
Hi Terry, I’m a regular reader of your column and website. My husband and I find ourselves in a quandary and hope you can help.
My husband and I are in our mid to late fifties (no dependents) and have had our retirement plans impacted by a job loss. I quit my job because of the negative effect the stress from the job was having on my health, which means no severance and no unemployment. I’m actively looking for a new job. Our current income has been reduced to cover only about half of our living expenses. We have been making ends meet by reducing spending and dipping into our emergency fund which will be used up in about six more months. Before that time, we hope to have restored much of our income. However, we are planners and want to have our options sorted out in case the situation continues beyond this time.
My question is regarding where you would advise we draw funds from, in a worst-case scenario that will cause the least damage to our retirement preparedness.
We are considering (in order):
Pausing contributions to my husband’s 401k
Borrowing from my husband’s 401k
Applying for a home equity loan
Refinancing to extend (lowering payment) and cash out some equity.
What are we not considering?
Terry Says
Thank you for sending more details than I thought wise to print. You are currently in good financial shape. You took a break — which you are allowed. The one thing that should be at the very top of the list is GETTING ANOTHR JOB ASAP!!
That will make all your other decisions easy! And right now, there are employers begging for competent workers, who have a work ethic. So don’t look back to the hassle of your former job. It’s YOUR TURN to pick up the slack in these most important years before retirement.
Without your income you won’t get a home equity loan, or be able to refinance. Your husband deserves to keep contributing to his plan and taking the deduction and letting the money grow. How would you like to be vacing this problem at age 70?? If you’re a “planner” plan to GO BACK TO WORK NOW!
