Feb 26, 2025
Building and following a financial plan is one of the best ways to increase your wealth. But the problem is, sometimes life doesn’t always go as planned.
If your household suddenly faces a change in income, your whole family’s finances could be tossed into chaos. That’s especially true if your partner has chosen to quit or leave their workplace voluntarily since in that case he probably won’t be entitled to unemployment benefits.
Advertisement
Without your husband’s income, you’ll have to rely on your monthly $3,000. Even if you have a tidy emergency fund of $25,000, you'll likely want to avoid drawing from that for as long as possible.
Of course, if you are trying to live on your salary alone, it may be hard to keep up with your retirement contributions. Say you were previously investing $1,000 per month into your 457(b) retirement plan and you continue doing that, you’d have just $2,000 a month to live on — which would be very hard.
So, should you pause contributions or should you try to keep making them?
Downsides to pausing retirement contributions
While discontinuing retirement savings during your husband’s period of unemployment may seem like a no-brainer, there are some pretty significant downsides to doing so.
For one thing, contributions to a 457(b) are tax-deferred. When you put money in, you aren’t taxed on the deposited funds. This means if you’re contributing $1,000 and are in the 22% tax bracket you save as much as $220 on your tax bill. The contribution you make only ends up reducing take-home income in the long run by $780 thanks to that tax break.
Your employer may also match at least some of the contributions you’re making. If you get a 100% match, you reduce your take-home income by $780 monthly to end up with $2,000 invested. That's a pretty great ROI even factoring in your ROI. Of course, if your employer caps matching contributions to a set percentage of your salary, your match may be less. Still, any matching funds are free money that helps your account grow.
Investment growth is also very important. As you invest and earn returns, this money can be reinvested and the power of compound growth means it grows very quickly. If you pause investment contributions, you don't just lose out on the money you would have contributed, you also lose out on the gains that money would have made.
Must Read
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
- Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
How to balance immediate needs with long-term goals
Unfortunately, you're in a tough position here. It doesn't make a whole lot of sense to pause retirement contributions if you don't have to — but you also need to cover the bills and don't want to end up in debt. Using your emergency fund money up is also risky.
The good news is that none of this must be an all-or-nothing proposition. You could, for example, decide to invest some money for retirement while diverting more of your take-home income to today’s expenses.
Advertisement
The best way to do that is to make a bare-bones budget and cut spending as much as you can. Once you’ve done that, see if you have any money left to invest. If you can cut spending enough to keep contributing, that’s great news — even if you don't invest the full $1,000, then anything helps.
Of course, ideally, you want to make sure you keep investing enough to earn the entire match available to you, no matter what. If using a small amount of money from your emergency fund supplements your income enough to keep investing, it may be worth using to avoid missing out on the free money that comes from the match.
You can also take some other steps to try to preserve your ability to continue saving for retirement, like exploring whether your husband can do some part-time gig work, such as driving for a ride-hailing company until he’s able to find a new job again. Or looking into whether your family might be eligible for government benefits like the Supplemental Nutrition Assistance Program while your husband is unemployed.
If you can cut spending and perhaps bring in some other income, you may be able to cover your costs, leave your emergency fund alone and still keep saving.
If it turns out you can't do that, and that pausing on investing is the only course of action, you'll also want to commit to restarting savings as soon as your husband is employed again. Otherwise, it can be hard to change from the status quo once you get used to not investing.
The best choice is ultimately going to depend on how much financial wiggle room you have, whether you can cover the essentials and still invest for retirement, and how your husband can help you during this time. Exploring these things can ensure that your husband's job departure doesn't have a devastating long-term impact on your finances.
You May Also Like
- Turning 50 with $0 saved for retirement? Most people don’t realize they’re actually just entering their prime earning decade. Here are 6 ways to catch up fast
- This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it. Which option would you pick?
- Warren Buffett used these 8 repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
- Here are 5 easy ways to own multiple properties like Bezos and Beyoncé. You can start with $10 (and no, you don’t have to manage a single thing)
Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
