My husband quit his job and we have $25K in emergency savings — I take home $3K/month, contribute $1K/month to a 457(b). Should I pause contributions to cover expenses or keep investing?

Downsides to pausing retirement contributions

While discontinuing retirement savings during your husband’s period of unemployment may seem like a no-brainer, there are some pretty significant downsides to doing so.

For one thing, contributions to a 457(b) are tax-deferred. When you put money in, you aren’t taxed on the deposited funds. This means if you’re contributing $1,000 and are in the 22% tax bracket you save as much as $220 on your tax bill. The contribution you make only ends up reducing take-home income in the long run by $780 thanks to that tax break.

Your employer may also match at least some of the contributions you’re making. If you get a 100% match, you reduce your take-home income by $780 monthly to end up with $2,000 invested. That's a pretty great ROI even factoring in your ROI. Of course, if your employer caps matching contributions to a set percentage of your salary, your match may be less. Still, any matching funds are free money that helps your account grow.

Investment growth is also very important. As you invest and earn returns, this money can be reinvested and the power of compound growth means it grows very quickly. If you pause investment contributions, you don't just lose out on the money you would have contributed, you also lose out on the gains that money would have made.

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How to balance immediate needs with long-term goals

Unfortunately, you're in a tough position here. It doesn't make a whole lot of sense to pause retirement contributions if you don't have to — but you also need to cover the bills and don't want to end up in debt. Using your emergency fund money up is also risky.

The good news is that none of this must be an all-or-nothing proposition. You could, for example, decide to invest some money for retirement while diverting more of your take-home income to today’s expenses.

The best way to do that is to make a bare-bones budget and cut spending as much as you can. Once you’ve done that, see if you have any money left to invest. If you can cut spending enough to keep contributing, that’s great news — even if you don't invest the full $1,000, then anything helps.

Of course, ideally, you want to make sure you keep investing enough to earn the entire match available to you, no matter what. If using a small amount of money from your emergency fund supplements your income enough to keep investing, it may be worth using to avoid missing out on the free money that comes from the match.

You can also take some other steps to try to preserve your ability to continue saving for retirement, like exploring whether your husband can do some part-time gig work, such as driving for a ride-hailing company until he’s able to find a new job again. Or looking into whether your family might be eligible for government benefits like the Supplemental Nutrition Assistance Program while your husband is unemployed.

If you can cut spending and perhaps bring in some other income, you may be able to cover your costs, leave your emergency fund alone and still keep saving.

If it turns out you can't do that, and that pausing on investing is the only course of action, you'll also want to commit to restarting savings as soon as your husband is employed again. Otherwise, it can be hard to change from the status quo once you get used to not investing.

The best choice is ultimately going to depend on how much financial wiggle room you have, whether you can cover the essentials and still invest for retirement, and how your husband can help you during this time. Exploring these things can ensure that your husband's job departure doesn't have a devastating long-term impact on your finances.