Should I stop contributing to my 401(k) and build up my cash?
With the small amount of information you have given us, I would recommend that you put all your savings in cash at this time. The next 6 months should be about building your cushion. The more you can save the better. Your goal should be to give yourself enough time to find the next job and not having to compromise or panic...
If your cash amount is too low, you might eventually have to dip into your retirement savings which would be very costly. It is better at this point to lean on the conservative side until things get back to normal.
I hope this helps.
Sorry to hear you are losing your job. Good move to accumulate cash in order to create a cushion. However, remember that inflation will eat away at your cash value if the account or investment is less than about 3%. At the same time, you should avoid the early withdrawal penalty of having to pull from a retirement account. I recommend you park your cash cushion in an individual taxable account with a conservative to moderate ETF portfolio to diversify risk. This can help you fight inflation (and potentially grow your balance) while reducing risk and allowing withdrawals at any time without penalty.
The answer to your question is a bit more complex than it seems at first glance. Without more details, it will be hard to give you a good answer.
So are you planning to look for another job in six months? If not, then you should have enough liquid assets - cash, savings and mutual funds to cover the entire amount you and your wife will be without a primary income.
However, if none of you is planning to join back the workforce and you are in a high tax bracket it might make sense to max out your 401k contributions as long as you have enough money to cover your living expenses before you can start using your IRA and 401k funds.
I suggest that you speak to a financial planner who can review your situation in depth and provide you with recommendation specific to your situation.
Not knowing your income or living expenses in this scenario can make for a more complex situation but I think it would be wise to hold off on contributions to the 401k for now and build up your cash cushion over the next few months. I’m not sure if your wife brings in any income but either way it’s generally best to be on the safer side and sit on more cash than you may need during this time than to have a less than sufficient cushion and have to dip into your retirement savings.
Remember once you're working for a new employer you can contribute to their 401k or similar program and invest your larger than needed cash cushion into other vehicles such as a deferred annuity, additional life insurance, brokerage account, etc.
Yes, it would be approriate to stop contributing to your 401(k) for a certain period of time to build up a larger emergency fund, especially since you are losing your job soon. You should be aware that this will increase your tax bill, though, due to the lower 401(k) contributions. Assuming you find another job soon and are able to resume your retirement savings, this extra savings in a taxable account can actually help with tax-diversification in retirement. Speaking of retirement, I would recommend at least a basic assessment of your situation to make sure that you are on track and can weather the job change appropriately.