*Warning not for WMDs = Weak Minded Dummies
Conventional advice would be to have at least 3-6 months of living expenses in case you lost your job or some emergency (car accident, car failure, medical emergency, etc). The reason is so you don't turn to a high penalty form of quick cash such as a pay-day money loan or credit card (20+%).
The proposed best practice is to contribute to your annual maximum or as much as you can to your Roth IRA account ("oh my you should be doing this already") and in case of an emergency you are able to withdraw all your CONTRIBUTIONS, penalty free with a turn around of a couple business days. For 2013 the max contribution is $5,500 a year. If need the cash you are able to call your broker and say you want to withdrawl that amount PLUS any other CONTRIBUTIONS. So that means if you have been adding money for the past 4 years, you are able to withdraw $5,500x4=$22,000 penalty free. Caviot say your investment has gone down you obviously won't be able to take it out and if your investment has gone up you will only be able to take out your CONTRIBUTIONS, $22,000 in this case.
Money sitting around waiting in a low interest bank account or CD/Money Market is the best way to ensure inflation and lost opportunity passes you by. The experts say don't touch your retirement because of 1) tax penalties and 2) lost appreciation. 1) this strategy has no penalties as long as you are withdrawing CONTRIBUTIONS. 2) Your alternatives are taking a 20%+ loan or 8-12% in the RothIRA, it is a simple analysis of what interest arbitration.
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