WWYD? Spousal job loss and my 401k contributions?

[minnie1928]

What would you do in this situation? Your spouse (the "breadwinner") for various, valid reasons has decided to leave his employer. You have an emergency fund that could carry the monthly deficit for several years, assuming spending is minimized.

So, should the spouse put 401k contributions on hold to lessen the monthly shortage? Drop to the minimum to maintain employer match?

Just curious...

[MonkeyMama]

Originally Posted by minnie1928

You have an emergency fund that could carry the monthly deficit for several years, assuming spending is minimized.

It depends.

In theory, I would just continue contribution to 401k. 10% is the minimum I would consider.

But, it depends how much we are talking about. Also, if you have the option to stop 401k contributions and put a lump sum at the end of the year - would make for more time to decide based on ongoing circumstances (smaller employers are probably more flexible with this - really just depends on the employer).

A more important thing to consider is the tax ramifications of the decreased income. Odds are that you can probably lower your tax withholdings to make up some of the lost income. If your tax bracket gets really low for a while, you may be better doing a ROTH IRA than a 401k. (If you are getting no real tax benefit from the 401k - why bother? Beyond the match...).

When my spouse lost his last job, we just stopped contributing to retirement. The thing is funded IRAs every year and made up what we could later with raises, etc. So, in the end I can honestly say we never put in less than 10% to retirement, though we did stop contributing for a time (That April 15 IRA deadline gives you lots of time to make up retirement contributions - we put in a lot of money on April 15 for prior years - but it's easy to make that decision when you look back and realize you don't have to drain your savings to do so - because the year wasn't so bad after all). I didn't have a 401k so my decision might have been different, otherwise.

[disneysteve]

Originally Posted by minnie1928

Your spouse (the "breadwinner") for various, valid reasons has decided to leave his employer.

should the spouse put 401k contributions on hold

I don't understand the question. If he is leaving his job, he can't continue to contribute to the 401k.

Do you mean he isn't leaving yet and you are thinking about stopping the contributions to build up cash in your EF?

[jpg7n16]

Originally Posted by minnie1928

What would you do in this situation? Your spouse (the "breadwinner") for various, valid reasons has decided to leave his employer. You have an emergency fund that could carry the monthly deficit for several years, assuming spending is minimized.

So, should the spouse put 401k contributions on hold to lessen the monthly shortage? Drop to the minimum to maintain employer match?

Just curious...

I wouldn't bother dropping your 401k - the only reason to do so is to free up needed cash, which you already have too much of. (Yes - you have too much in cash) Please tell us you don't have any CC debt, car payments, etc.

Besides, the breadwinner should be looking for work and hopefully find it soon. If they left of their own volition, they don't have to explain why they were let go.

Has breadwinner spouse filed for unemployment? Start there. Then start applying for new positions.

Lowering the 401k contribution doesn't change things much if at all, since there is so much cash already available.

[greenskeeper]

if you leave on you your own terms how can you claim unemployment? you aren't being laid off due to lack of work.

how can you contribute to a company 401k that you no longer work for?

doesn't add up unless I am missing something?

[disneysteve]

Originally Posted by minnie1928

You have an emergency fund that could carry the monthly deficit for several years

Originally Posted by jpg7n16

you have too much in cash

I missed that. Why do maintain an EF of "several years" worth of expenses? Why not cut back to 8 or even 12 months and invest the rest?

[MonkeyMama]

I assumed she meant that her spouse was leaving and that she is talking about her 401k.

I think saying she has "too much in cash" is jumping to conclusions. Could be so, but I would have to have a much bigger picture details to jump to that conclusion. Maybe some of us like the flexibility to leave out job in cases like this. In this case - maybe not too much cash? Anyway, she did not say many years of expenses in cash. They have many years of "cash shortfall while spouse is not working" in the bank. These are likely two very different figures.

[minnie1928]

Originally Posted by MonkeyMama

I assumed she meant that her spouse was leaving and that she is talking about her 401k.

I think saying she has "too much in cash" is jumping to conclusions. Could be so, but I would have to have a much bigger picture details to jump to that conclusion. Maybe some of us like the flexibility to leave out job in cases like this. In this case - maybe not too much cash? Anyway, she did not say many years of expenses in cash. They have many years of "cash shortfall while spouse is not working" in the bank. These are likely two very different figures.

Yes, I'm talking about my 401k...not his. Obviously once he leaves his employer, his 401k contributions will cease.

I probably do have too much in a cash position, but this year has been very tumultuous and we decided to hoard cash to make things a bit more secure. We moved across the country, sold our house in NJ for a loss, bought a new house, paid for moving, etc, etc.... We had too many things "up in the air" to further risk in the stock market, but once things settle down I'll be going back to the market. I know I'm not really "earning" any money in our savings accounts.

As far as debt, the only debt we have is our house. No car payments, no student loans, monthly CC purchases are paid in full each month.

My bigger concern is that he may be unemployed for a while. His profession is very niche, so there aren't a lot of jobs at his level.

[minnie1928]

Originally Posted by greenskeeper

if you leave on you your own terms how can you claim unemployment? you aren't being laid off due to lack of work.

how can you contribute to a company 401k that you no longer work for?

doesn't add up unless I am missing something?

He wouldn't claim unemployment and would not be contributing to a 401k. My question was directed more towards his spouse's 401k contributions. Sorry for the confusion.

[disneysteve]

In that case, no, I wouldn't stop your retirement contributions. As long as you guys can live on your income alone with you still making the 401k contributions, that's what you should do. Cut your expenses as needed to make that happen. If his usual career is a niche job with limited employment opportunities, then he needs to be out looking for other work to do until a job in his field opens up. He shouldn't be sitting around unemployed for an extended period, especially if that would mean drawing down your savings.