[US] The Emergency Savings Act of 2022

When US employees struggle to afford unexpected expenses, they frequently turn to their retirement funds. The proposed Emergency Savings Act of 2022 is intending to fix that, ADP reports.

Inflation is hitting a 40-year high leaving many Americans struggling to keep up with rising prices. Studies reveal that they are also putting less money aside for emergencies or long-term financial goals.

When that includes your employees it is bad for business.

Financially stressed workers can't perform at their best when they're distracted by worries about meeting daily expenses or putting aside money for emergencies. And they cannot think ahead to saving for retirement, which adds to their stress the closer they get to retirement age.

Solving the issue of emergency savings

Research has shown that people who don't have access to savings often turn to their retirement funds to pay for unexpected expenses.

The proposed legislation now being considered by Congress as part of the SECURE Act 2.0 is intended to address this problem in one of two potential ways:

• Allowing companies to automatically enrol employees in emergency savings accounts at three per cent of pay. Workers would be able to save up to $2,500, with excess contributions automatically shifted to the company's 401(k) plan.
• Permitting workers to withdraw up to $1,000 from their retirement account for emergency expenses without incurring the typical 10 per cent tax penalty for early withdrawal.

This emergency savings option may help reduce the impact of unforeseen expenses on retirement savings. The findings of a new survey indicate that 61 per cent of workers enrolled in a company retirement plan would contribute to an emergency savings plan in addition to the retirement contributions they're already making.

Employer-sponsored retirement plan

With financial security on employees' minds, retirement savings benefits have reportedly become an important differentiator when it comes to attracting and retaining the skilled talent every business needs.

Combined with financial wellness education and tools like emergency savings, a company-sponsored retirement plan will pay dividends for employees and employers alike.

Source: ADP

(Links via original reporting)

When US employees struggle to afford unexpected expenses, they frequently turn to their retirement funds. The proposed Emergency Savings Act of 2022 is intending to fix that, ADP reports.

Inflation is hitting a 40-year high leaving many Americans struggling to keep up with rising prices. Studies reveal that they are also putting less money aside for emergencies or long-term financial goals.

When that includes your employees it is bad for business.

Financially stressed workers can't perform at their best when they're distracted by worries about meeting daily expenses or putting aside money for emergencies. And they cannot think ahead to saving for retirement, which adds to their stress the closer they get to retirement age.

Solving the issue of emergency savings

Research has shown that people who don't have access to savings often turn to their retirement funds to pay for unexpected expenses.

The proposed legislation now being considered by Congress as part of the SECURE Act 2.0 is intended to address this problem in one of two potential ways:

• Allowing companies to automatically enrol employees in emergency savings accounts at three per cent of pay. Workers would be able to save up to $2,500, with excess contributions automatically shifted to the company's 401(k) plan.
• Permitting workers to withdraw up to $1,000 from their retirement account for emergency expenses without incurring the typical 10 per cent tax penalty for early withdrawal.

This emergency savings option may help reduce the impact of unforeseen expenses on retirement savings. The findings of a new survey indicate that 61 per cent of workers enrolled in a company retirement plan would contribute to an emergency savings plan in addition to the retirement contributions they're already making.

Employer-sponsored retirement plan

With financial security on employees' minds, retirement savings benefits have reportedly become an important differentiator when it comes to attracting and retaining the skilled talent every business needs.

Combined with financial wellness education and tools like emergency savings, a company-sponsored retirement plan will pay dividends for employees and employers alike.

Source: ADP

(Links via original reporting)