I’m going to take the easy way out: Split the money and do both. However, don’t split the money evenly.
Before we get to the amounts, let’s talk about the basics…
Elsewhere in your letter, you said you and your husband are in your late 40s. If you have no significant retirement savings, you definitely need to start now. Your money will make the most interest there.
How much? I recommend you use the Traditional IRA Calculator built by my friends at Bankrate.com. You’ll notice the longer you invest, the higher the interest you’ll earn on your money.
Of course, saving for retirement won’t really help if you’re not prepared for an illness, accident, or natural disaster now. Sure, many retirement funds allow you to tap into them, or take out loans against them, for specific emergencies. Doing so takes time and paperwork, and during an emergency, you have little of the former and no patience for the latter.
That’s why I’d set aside $5,000 for an emergency fund. That’s not the standard “three to six months of living expenses” most financial experts recommend, but I’ve always had mixed emotions about that advice: Yes, that figure is the ideal, but for those who aren’t close to achieving it, such a high number can be discouraging. You might quit before trying.
After consulting with so many clients over the years, I’ve noticed $5,000 is seldom enough to cover the bills, but it at least buys you time to get your wits about you after an emergency hits. Then you can clearly figure out your next steps.
So with that said, I’d suggest putting $24,000 into a retirement account. There are so many kinds, with differing levels of risk, it’s difficult to advise you without further conversation and research. You and your husband should look into this together. Hopefully, it won’t result in another fight, but if it does, you know how to reach me!
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Email your question to firstname.lastname@example.org and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of Debt.com, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.