Q & A
I am lucky — especially as a woman — to have an old-fashioned lifetime defined-benefit pension, which will pay about $50,000 each year (COLA included), and I will receive a higher-than-average Social Security payment. I will also have access to a moderately priced Medicare supplement or Medicare Advantage plan. My husband will have a modest defined-benefit pension of about $10,000 a year (no COLA) and has approximately $300,000 in a 401(k). He will also be receiving a higher-than-average Social Security benefit. Between our pensions and Social Security, we will have (mostly) inflation-protected lifetime payments. When we retire, our house will be paid for. I have about $100,000 in cash. I would like to put some of my cash into 529 [college savings] plans for my five granddaughters. I also would like to pay cash for some home renovations and have a “life happens” fund. So do I even need an emergency fund?
Answer: The point of an emergency fund is to have available cash for unplanned expenses or a disruption in your income. Be careful about spending down your cash reserves even for a good deed like helping grandchildren attend college. Even with your good pensions, you still should have an emergency fund for future cash needs you haven’t anticipated. Read more…