U.S. Senators Todd Young (R-Ind.) and Cory Booker (D-N.J.) on Wednesday introduced the Emergency Savings Act of 2022 to help Americans save for unexpected expenses without having to tap into their retirement accounts. The bill would facilitate convenient and affordable access to workplace emergency savings accounts, improving financial security and reducing retirement savings leakage.
According to a report by the Federal Reserve, almost half of Americans would struggle to cover an unexpected $400 expense. A recent study found that, in the past year, almost 60 percent of retirement account participants who lack emergency savings tapped into their long-term retirement savings, compared to only nine percent of those who had at least a month of emergency savings on hand.
The Emergency Savings Account Act of 2022 builds upon work by Senators Young and Booker to develop this concept over the last several years, including the Strengthening Financial Security Through Short-Term Savings Accounts Act of 2021.
Young
“We can’t always predict the future, and too many Hoosier families encounter situations where they struggle to cover unexpected expenses through no fault of their own,” Sen. Young said. “Unfortunately, this can cause families to dip into their retirement savings, which harms their financial future. Our bipartisan bill would help families create stable emergency savings for unforeseen expenses, while keeping retirement accounts intact for the future.”
Separating emergency savings from one’s retirement savings account will provide participants a better understanding that one account is for short-term emergency needs and the other is for long-term retirement savings, thus empowering employees to handle unexpected financial shocks without jeopardizing their long-term financial security in retirement through emergency hardship withdrawals.
Click here to read the full text of the bill.