Social Security will only replace about 40% of your income, so retirement funds should be started as early as possible so they have a long time to grow. However, Money Answer Man Jordan Goodman sees the benefit of a healthy emergency fund for an unseen difficulty as well. We're told to have an emergency fund equivalent to 3 months of expenses...and many workers want to have that fund ready before they start saving for their retirement. Goodman says try to save for both simultaneously. "If you can possibly do both - that's the best way to do it. If you only build up your emergency fund, you'll have less for retirement. If you only save for your retirement, you'll have nothing to fall back on in the case of a lost job, an illness or a natural disaster."
Goodman says, "It's NOT a choice of one or the other" Goodman says the least painful way to save for retirement is through payroll withdrawal. Goodman continues..."You do still want to put money aside for your retirement. The best way to do that is come kind of retirement plan at work like a 401 (k)." For your emergency fund, set up an automatic deposit into a money market account from your paycheck direct deposit. That way you automatically take care of yourself now and in the future.
photo:GettyImages
Saving for retirement and EmergencyPhoto: Getty Images