Dave says: You’ll always need an emergency fund

May 12-- May 12--Q. I'll be retiring in the next couple of years. When I leave my job, we will have a yearly income of $65,000 through my pension. I don't think we need an emergency fund with such a dependable, steady income stream like that, but my wife disagrees. She says she would feel safer if we had money set aside just for the unexpected. What do you think we should do?

A. A good pension can feel pretty solid, but nothing's perfect. Nothing lasts forever. There's always the possibility of lost income or large, unexpected expenses. What if one of you has a major medical event? Life can bite you at any time, and sometimes it will take a big financial chunk out of you. You need an emergency fund!

I recommend an emergency fund of three to six months of expenses. Put it in a good money market account with check writing privileges and a decent interest rate. That way, your money will work for you a little bit. With a solid pension like you're talking about, you could probably lean toward the three-month side, if you wanted. Honestly though, I'd save up six months of expenses -- just in case.

Trust me, a fully funded emergency fund will make you both feel better. Plus, it can turn a disaster into nothing more than an inconvenience!

Q. The school system I work for puts 12% of my pay into a public teacher retirement fund, and they match this amount. I've seen where you tell people to put 15% of their income toward retirement. If that's the case, should I put three percent into another retirement fund? I have no debt and very little in terms of expenses. Or, what would you think about the idea of opening another retirement account at a full 15% of what I make?

A. I wouldn't go as far as to pour an additional 15% into a different retirement plan, but I would consider putting maybe eight to 10 percent into a Roth IRA. I want you to have some money that's separate from the school system account, just in case things go south with their retirement fund.

It sounds like you've got a pretty good pension plan, but you never know what might happen. I'm not predicting bad things, but at the same time there's no way I'd lean on the school system fund as my one and only source of retirement income. You should never put all your financial eggs in one basket!

DAVE RAMSEY is CEO of Ramsey Solutions. He has authored seven best-selling books, including "The Total Money Makeover." Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

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