my two cents

‘It Feels Pointless to Save for Retirement Now’

Photo: The LIFE Picture Collection via Getty Images

I’m a 50-year-old single mom (my kid is in grad school) and I work full time. I’m still employed but scared about my job security. I have an emergency fund, but I’m afraid that it isn’t big enough. I have one credit card with a limit that hasn’t been lowered (yet) and a big balance from my divorce. I contribute just enough to my company’s 401(k) plan to get the match, but I’m still not putting very much away. I started saving for retirement late, not until my mid-30s. My question is, should I continue to skimp on my 401(k) savings in order to make faster progress on my emergency fund and debt repayment? It just seems pointless to save for retirement right now.

It’s exhausting when you’re doing everything right and it’s still not enough. It also feels ridiculous to save for retirement when your immediate needs are so much more pressing. But the truth is, your best option is to stay the course you’re on and make a contingency plan in case things go sideways.

To brainstorm your options, I called Kathleen Krumpter, a senior financial counselor for the New York Legal Assistance Group. She confirmed that there’s no silver bullet for your situation, but your instincts are on point. “Between your debt and your emergency fund, I think saving up more cash is a bigger priority given the economic climate and the fact that your credit limit could be lowered at any time,” she said. “It’s important to have three to six months’ worth of expenses on hand, especially if you’re a parent.”

That may sound like an unachievable amount, and your progress won’t be linear; be patient. In the meantime, remember: “If you lose your job, you won’t have to subsidize all of your expenses with your emergency savings — you will presumably receive unemployment benefits, too,” said Krumpter. Those benefit checks won’t be enough to live off on their own, and they will almost certainly be difficult to access. But it may ease your mind if you calculate what your unemployment benefits would amount to, and then work out a budget, integrating your emergency savings, to figure out how long you could go without a job if you had to. I truly hope this remains hypothetical, but having a specific worst-case-scenario plan can give you a sense of control over an uncertain future.

Doing the math for your emergency fund will also give you a better picture of how much more you need to save, gradually, in order to hit a number you’re comfortable with. Constantly thinking, “I haven’t saved enough” will guarantee anxiety, but thinking, “If I save $40 extra dollars a week, I’ll have two months’ worth of expenses saved by December” gives you a plan. Vagueness is the enemy here. Aim for realistic, concrete steps.

Of course, you also need to consider the two other financial gorillas in the room: your retirement savings and your debt. Krumpter recommends that you continue making your minimum credit-card payments at the very least (and definitely on time) to prop up your credit score as much as possible. And meanwhile, keep doing what you’re doing with your retirement savings — you definitely want to contribute enough to get your company’s matching benefits (it’s free money, after all). Then, once you’re on more solid footing with your emergency fund, you’ll want to pay down your debt and boost your retirement savings with all that you can spare.

Krumpter also mentioned some alternative financial moves that you may be considering but should avoid; they are all much riskier than what you’re doing now. To start, you should not try to borrow money against your 401(K) savings to pay your debt, which might sound tempting but puts you in a very bad position if you get laid off (you’ll be on the hook for the full amount you borrowed, immediately, or it’ll count as a withdrawal and you’ll get hit with a big tax penalty).

Another idea to put off for now — but one that’s worth trying down the road in less shaky circumstances — is rolling your debt onto a balance transfer card with no interest rate for a period of time, usually 12 to 18 months. This tactic can be helpful for getting rid of debt, but it hinges on the fact that you must pay off the balance within the limited period, or else the interest rate comes back with a vengeance. If you’re worried about your job security, now isn’t the best moment to commit to a punishing timeline. “You have to be ready to pay down all of that debt, on time, for that option to make sense,” said Krumpter. “Otherwise you could just be back in the same position that you’re in today.” So, save this for later, and keep your credit score as high as possible so that it remains an option.

And finally, your retirement savings — I agree that you shouldn’t skimp. But you also have a lot of competing priorities, so don’t beat yourself up if you aren’t as far along as you want to be. Christine Benz, the director of personal finance at Morningstar, once told me that “financial multitasking” never really ends. “We’re all juggling multiple financial goals throughout our lives, and the key is to get comfortable with that,” she said.

I picture my own money flowing (or sometimes trickling, let’s be real) into multiple pots, and I’m constantly adjusting the spigots. It takes attention, time, patience, and sometimes professional help. You mentioned that you started saving for retirement late; I’m not sure how far behind you are, but it might be worth meeting with a fee-only financial adviser to get a long-term plan. Krumpter recommended using this database to find one, or getting in touch with a local nonprofit group that offers financial planning resources, like hers.

One more note: It sounds like your divorce settlement is done, thank goodness. But if you ever have to pay legal fees again, try not to put them on your credit card, Krumpter advised. Your lawyer may be able to work out a payment plan with you that won’t involve sky-high interest rates.

It’s nerve-racking to be financially vulnerable, I know. But remember, You are okay right now, and you’re taking all the right steps to be okay in the future, too.

‘It Feels Pointless to Save for Retirement Now’