Here's How Having an Emergency Fund Could Save Your Retirement Nest Egg

You never know when you might roll out of bed only to find that your heat won't kick on, your car won't start, or your pet has littered your bedroom carpet with puke and is in need of an urgent visit to the vet

Unplanned expenses can arise at any time

So can an unwanted layoff

For this reason, it's important to equip yourself with a solid emergency fund at all times

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There's some mixed news in that regard

You might look at your emergency fund as tection against near-term financial upheaval

But a strong emergency fund could also be your ticket to preserving your retirement savings

Short-term tection equals long-term success It's that an emergency fund could you from taking on debt in the near term

If you're laid off and have enough money to cover your bills until you find a new job, it spares you from having to charge those bills on a credit card and pay interest on a carried balance

But that's not the only benefit of having emergency savings

In the absence of an emergency fund, you may be inclined to tap your retirement nest egg early when a need for money arises

Raiding that account to cover an unplanned bill or cope with unemployment could whittle that balance down substantially, leaving you in the lurch once retirement rolls around

And if you're thinking, "I'll put back any money I take out of my retirement savings once my situation stabilizes," think again

It's a good thing to aim for, but it may not happen

And you can't afford to take that risk

Should your emergency fund trump your retirement savings

Believe it or not, it should

The more time you give your nest egg to grow, the more wealth you're ly to accumulate ahead of retirement

But it's a dangerous thing to leave yourself without access to money to pay for unexpected expenses

So if you don't have an emergency fund, before you contribute to a retirement account, boost your near-term savings instead

In fact, you should know that an emergency fund isn't just something working people need

You should always have a robust emergency fund in retirement in case you have an immediate need for cash and it's a bad time to sell assets in your portfolio

How much of an emergency fund should you aim for

The answer depends on whether you're working or retired

If you're working, you bably want enough to cover at least three to six months of essential expenses

The logic is that a savings balance that large gives you time to find a job in the event you become unemployed

If you're retired, it's generally a good idea to have one to two years' worth of living expenses in cash

You could call that your emergency fund or call it the cash portion of your portfolio -- it doesn't matter

The key is to have money that's available to you at all times and isn't subject to fluctuations in value stocks or even bonds are

With living costs being as high as they are today, putting money into savings is not an easy thing for a lot of people

But it's important to build yourself an emergency fund if you're lacking in that area -- for the sake of your near-term finances as well as your future

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