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Survey: Workers Would Save More for Retirement with Emergency Savings


With many workers unable to cover the cost of an emergency, a new survey finds that most would support legislation allowing them to tap into a small portion of the retirement savings account to cover the cost.

AIG Life and Retirement’s survey of more than 1,200 American workers explored how:

  • unexpected expenses can affect their personal and financial situations;
  • how they currently manage emergency expenses; and
  • whether proposed legislation to provide access to a limited amount of their retirement funds for emergency needs would be beneficial to them—including whether it might incent more retirement savings.

Notably, after receiving an explanation of the Enhancing Emergency and Retirement Savings Act (S. 1870/H.R. 7146)—legislation that was endorsed by the American Retirement Association—74% of respondents who currently contribute to a retirement plan said they would increase their contributions.

What’s more, 73% of those who do not currently contribute say they would start contributing if they could obtain penalty-free access to $1,000 in retirement funds for emergency needs, as provided for in the legislation.  

Additional findings show that:

  • 79% support legislation that allows penalty-free access to $1,000 in retirement funds for emergency needs;
  • 76% believe the bill will encourage retirement plan participation and help make people feel more secure; and
  • 65% believe it will encourage workers to save more for retirement.

As part of the survey, AIG also found that facing an unexpected expense is disruptive, both financially and personally, particularly when they must scramble to cover the costs. And unexpected costs are common.

In fact, the survey found that, in the past three years, 85% of respondents had at least one emergency need of $500 or moreand a similar amount (79%) had at least one emergency need of $1,000 or more. In addition, 33% said they are currently experiencing stress due to an emergency expense.

For those who do not have emergency funds readily available, AIG found that the most common options include using a credit card, borrowing from family or friends, and borrowing or taking an early withdrawal from a retirement saving account.

To that end, only 44% of respondents said they could pay the expense without incurring debt or using retirement funds. And in some situations, respondents left a need unmet. Here, the survey found that within the past three years:

  • 44% delayed making a repair;
  • 43% did not pay off a credit card;
  • 37% overdrew an account or bounced a check; and
  • 28% did not go to the doctor or send their child to a doctor.

To qualify for the survey, conducted in January 2022, respondents were required to be working, have a household income under $200,000, be a financial decisionmaker, and be between 21 and 76 years of age.

Competing Versions

Meanwhile, as Congress returns from its summer recess, all eyes will be on what happens with the so-called SECURE Act 2.0 legislation (Securing a Strong Retirement Act) that was passed last March by the House of Representatives and two retirement security bills put forward by the key Senate committees. 

Currently, there are two competing versions of emergency savings legislation that are vying to be included in a year-end retirement security bill. While the House’s SECURE Act 2.0 does not currently include an emergency savings option, the Senate Finance Committee’s Enhancing American Retirement Now (EARN) Act approved in June includes a provision that is consistent with the Enhancing Emergency and Retirement Savings Act cited above.

The EARN Act would allow one distribution per year of up to $1,000, and a taxpayer would have the option to repay the distribution within three years. No further emergency distribution would be permissible during the three-year repayment period unless repayment occurs.

Additionally, the Senate’s Health, Education, Labor and Pensions (HELP) Committee’s RISE & SHINE Act, also approved in June,  would provide employers the option to offer pension-linked emergency savings accounts, which may automatically opt employees into these accounts at no more than 3% of their salary, and the accounts are capped at $2,500 (or lower as set by the employer). Contributions would be made post-tax and would be treated as elective deferrals for purposes of retirement matching contributions. Once the cap is reached, the excess emergency savings contributions return to retirement plan savings.