Should we fund our emergency fund with money out of a retirement account?

Should we fund our emergency fund with money out of a retirement account?
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I am over age 59 ½, still employed and I have a TSP account which has around 52k in it. We recently filed for chapter 13 bankruptcy so we have no credit cards, no savings, and two loans with TSP so another loan is not possible.
Without savings, we feel that it might be prudent to establish some kind of emergency fund to cover unexpected expenses that may soon arise, for last minute emergency travel, medical etc… The only option I see is to take money from the retirement account and set up a fund that we can access on short notice. I do have the option to take a withdrawal from TSP, but it takes a while to get the money and if we need to travel quickly, we simply can’t wait that long. Also, my understanding is that we cannot make another partial withdrawal later if we needed to.
Aside from a regular savings account, where would be the best place to put this money so that I still earn some kind of decent return, and be able to access a portion of it when we need it?
Thanks in advance


You need to make sure you are on a budget and taking advantage of the fact that you have no debt. Taking from retirement should be the very least thing you do.
Making a budget can be one of the most powerful tools for getting your money to do what you want it to do. In order to build a budget, find out what and how you are currently spending. You can do it by taking these steps.

  1. If you use a debit card, go to your checking account either on your phone, computer or your monthly statement. Determine a 30 day period (i.e. March 1 -31, or February 15 – March 15). Any 30 day period will work.
  2. Go through each debit (spending) item and put it in the proper category on the sheet provided. Feel free to change or add categories as needed. Break out each purchase if necessary. If you go to the gas station and fill your tank and buy a bag of chips, put the dollar amount you spent on gas under the Gas category, and put the dollar amount you spent on the chips under the Snacks category. If you aren’t sure, just make the best guess you can.
  3. Once you have completed the 30 days, total up each category.
  4. Put the totals from each category into your budget.
  5. Add your fixed payments into your budget as well. (i.e. house payment, car payment, insurance, cable). The payments that stay the same each month.
  6. Put your Total Monthly Income into your budget. Don’t forget to put bonuses, child support, alimony, etc.
  7. Subtract your monthly expenses from your monthly income.
    You have just made a budget! Congratulations! Do you have a positive or negative number at the bottom? If you have a negative number, here are a few ideas to help change that.
  8. Go to those categories that you have the most control over such as groceries, eating out and entertainment. Decide how much you can cut from these first.
  9. Take a look at your fixed expenses. Can you cancel the premium channels from cable? Is the car you drive just too expensive? Can you change your cell phone service and get a better deal?
  10. If your spending is as low as possible, the other possibility is to increase your income. Consider getting a part time job. Do you have a hobby that you could parlay into some income such as cake baking or sewing? How about house cleaning or dog walking?
    What’s important to remember is that these cuts or the extra job isn’t necessarily forever. You just need to do it so that you can pay down your debt and get your budget under control. Once that is done, you can ease up and relax a little. GOOD LUCK!


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