re: Best strategy for emergency fund savings?

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Sure you can withdraw the principal, but you only get 60 days to replace it and then you've wasted that opportunity.

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One exception to this is the fact that you can replace the same year contributions all the way to April 15.


And as for the mentality in general, about a wasted opportunity: it is only true if you would otherwise be maxing out your Roth even without a plan to putting your emergency fund into it, which doesn't apply to the vast majority of investors.

If you aren't maxxing out your Roth already, then the only opportunity wasted is that of tax free growth of capital.

As for withdrawal: it all depends on what you put it into and what the vendor offers. I can get my money in a single business day. Also, no one said you had to put a 100% of it in an investment. When you realistically should have at least 20k in a fund, and often times more, I personally can't think of an emergency that would demand that much within a week.

Also, it's probably wise to have a couple grand serving as a cash buffer in savings for more minor events that aren't true emergencies.

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Sure you can withdraw the principal, but you only get 60 days to replace it and then you've wasted that opportunity.

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The comment is directed towards people who haven't already maxed out their Roth. They would have wasted that opportunity already. No one ever suggested to someone who already fully funds his Roth to start just calling that his emergency fund and use a taxable account for retirement.

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In a true emergency I want access to the money that day too.

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Why? Do you not have a credit card? Please tell me a couple of situations where you would absolutely require $10k in cash, in your hand, in less than 24 hours.

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Getting it out of a Roth would probably take at least a week or so.

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Probably so. But any major expenses that I would have in that week would go on my credit card and be paid off the next month anyway.

The idea of an emergency fund isn't saying you shouldn't have an extra $1k or $2k in your checking account for some quick cash when an unexpected expense arises. An emergency fund is for when something very bad happens... ie a major accident or losing your job or something where expenses are inevitable and income is lost and/or delayed.