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Ask Jean Tuesday: Funding Your Future

iStock_000009149480XSmall“I am just getting started with working full time. My job offers a pension which is automatically taken out of my check. My job also offers a supplemental retirement plan. I currently have no savings. I am going to contribute to a supplemental retirement plan AND I would also like to start saving for a 6 months emergency fund, hopefully, with ING Direct. Should I contribute more to my retirement plan or a 6 months emergency account?”  – A. Santos

This is a perfect question because it shows that you are thinking in exactly the right way!  The answer is that your emergency savings comes before the supplemental retirement plan.  Figure out how much that emergency nut has to be (six months worth of living expenses — i.e. money you’d need to sustain you if you lost your job not the amount of money you choose to spend every month), then how much in free cash you can muster toward meeting that goal.  Have the free cash automatically transferred out of your checking account and into the ING Direct account. (That’s another smart move on your part, by the way, because ING Direct offers savings rates that are consistently above average.  If you want to see which other banks make the cut, go to bankrate.com for a list of the top-paying savings and money market accounts in the country.)  Once that emergency cache is filled, talk to your benefits department about automatically having the money moved into your supplemental retirement plan instead.  Good luck in your new career!

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