I wanted to say a little more about my decision to cancel my 401(k) contribution so all you nice people don't worry about me ;)
I am 37 years old and I currently have approx 71k in tax-deferred accounts (401k and Rollover IRAs) and a little over 8k in tax-free accounts (my one Roth IRA) and about $2700 in taxable accounts as my emergency fund. If all goes well with my company, I can expect another $11k or so in my tax-deferred accounts (though the "when" is anybody's guess).
After noodling for about three months, I finally made a decision to re-prioritize my savings efforts until I had my emergency "bucket" fully funded. All year I have read ALL sorts of expert suggestions on how big to make an emergency fund...from the "just use your home equity" camp to the "9 months of living expenses" folks and I have chosen something in between.
My plan is to have 10k set aside in liquid assets to cover three months of living expenses. If things happen to get more extreme, I can access as much as 9k from my own Roth IRA (in contributions) by about April (let alone contributions LaLa has made to her Roth) but for me this is an absolute LAST RESORT. I do not want to touch any of my tax-free assets.
I am not conservative when it comes to my emergency funds as I have lived through a year of unemployment while LaLa had a part time job that paid $12/hr. That year was truly trying financially...but we made it through ok and kept the house ;) I certainly don't intend to be caught in that situation again, but I want to get a little more aggressive in having my savings work for me more efficiently.
I've already put nearly $13k away tax-deferred in 2005 and after I meet my other savings goals for 2006 I will begin 401(k) contributions again -- most likely 4th quarter. But in all honesty, my fund options for my 401(k) are pretty poor. The S&P 500 index fund available to me has an expense ratio of about 1.4% -- yes, 1.4% ... on an INDEX FUND. So part of my decision to re-prioritize my 401(k) funding has to do with thinking I can do a little better with my money...despite the tax hit....again, not for the long haul necessarily, but while I get things in order.
Starting this month, I can put an additional $800 a month toward the emergency fund. I had been putting a steady $100 a month in, augmented by other inflows that came my way each month (rebates, ebay sales etc). LaLa will also be reprioritizing the savings pools but her income is erratic (she is a freelance web and graphic designer). I figure that we can easily meet our emergency fund goal by April while maxing out our 2005 Roth contributions AND still meet our 2006 Roth maximums by the end of 2006.
I think this makes the most sense in our particular situation and I am not advocating that others stop their 401(k) contributions simply because an employer doesn't match (I have been maxing my 401k for years with no matching whatsoever). I feel I am simply temporarily shifting my savings priorities to build a more stable financial foundation that suits our circumstances. But even though I am convinced this is right for us...I am still interested in what others think!
Care to weigh in?