Save money in emergencies: Secure 2.0 expands workplace options

If you want to shore up your household finances, experts generally agree that building an emergency savings fund is the best first step.

However, data consistently shows that for most people, it’s a good idea to have a meaningful amount of cash set aside to fall back on in case the unexpected happens.

More than half (55%) of employees don’t have enough savings to cover a $500 emergency expense, according to a recent study by SecureSave, a workplace emergency savings account provider.

According to a survey of 1,028 workers conducted in June, this cash crunch is causing significant financial strain. Forty-one percent of respondents said they skipped necessary expenses like medical bills, food, and car repairs because they didn’t have enough savings to cover them.

“We’re more at risk than ever because we know that workers have jobs and paychecks coming in and they’re still not making money,” said Suze Orman, a personal finance expert and co-founder of SecureSave.

Other research also shows that having extra cash can be a difficult goal.

The Federal Reserve’s 2025 Report on the Financial Health of U.S. Households found that 63% of adults can cover a $400 emergency expense with cash, savings, or a credit card paid for on the next statement. This percentage has remained unchanged for the past three years, since a high of 68% in 2021.

The Fed’s survey was based on responses from more than 13,000 consumers and was conducted in October.

Recent data shows that some consumers’ budgets are under pressure.

According to the latest Consumer Price Index data, the annual inflation rate was 3.4% as of July, with prices for a wide range of goods and services moderating. However, it remains above the US Federal Reserve’s target of 2%. Meanwhile, average gas prices are now above $4 a gallon, the highest level ever for this time of year, according to gas price tracking app GasBuddy.

Total household debt in the second quarter was $18.8 trillion, up $4.6 trillion from the end of 2019, before the pandemic recession, according to the New York Fed. The amount fell by 0.1%, or $13 billion, from the first quarter, the central bank said in its latest household debt and credit report.

According to the Federal Reserve, auto loan balances rose to $1.71 trillion in the second quarter and credit card balances rose to $1.26 trillion, close to the record high of $1.28 trillion set in the fourth quarter of 2025. New car loan and credit card delinquencies are both at high levels, the central bank said.

As the cost of living rises, retirement savers are increasingly turning to needy withdrawals, which allow them to use the funds for eligible purposes such as emergencies, as well as to fund college, medical expenses and home purchases, according to Vanguard.

The percentage of Vanguard defined contribution plan participants who made a withdrawal under hardship conditions increased from 2% in 2020 to 6% in 2025. Inflation and rising interest rates may have contributed to the fiscal burden, according to a recent Vanguard report. The company says the design of retirement plans can also encourage such behavior.

“Drains from retirement accounts are becoming a growing problem,” said Shai Akabas, vice president for economic policy at the Bipartisan Policy Center, a Washington think tank that promotes bipartisanship.

“The main solution is to find tools that allow employees to save for emergencies,” he said.

Legislation passed by Congress in 2022, known as “Secure 2.0,” included changes aimed at encouraging employers to save for emergencies.

Participants in defined contribution plans can withdraw up to $1,000 per calendar year without penalty for emergency expenses. However, that amount typically has to be repaid within the next three years before any further emergency withdrawals can be made.

Additionally, the law also allows workers to automatically enroll in a Pension-Linked Emergency Savings Account (PLESA), allowing them to contribute up to $2,600 annually through 2026. These can be withdrawn without taxes or penalties.

According to a recent Vanguard analysis, only 4% of 401(k) plans allow emergency 401(k) withdrawals of $1,000.

Craig Copeland, director of benefits research at the Employee Benefits Research Institute, which provides data and research on employee benefit programs, said PLESA “hasn’t really gone anywhere” because of the time it took for regulations to be announced and for record keepers to develop the ability to offer benefits.

In April 2025, T. Rowe Price announced the launch of its first pension-linked emergency savings account.

Workplace emergency savings accounts, which are gaining attention, are separate from 401(k)s and other retirement savings plans, Copeland said.

These include products from companies such as SecureSave and Sunny Day Fund, as well as initiatives from asset managers such as: fidelity and black rock.

For employers, emergency savings can be a cheap benefit to offer, especially if they just facilitate payroll deductions, but employers may also choose to contribute to their emergency savings, Copeland said.

“We find that when they offer benefits, people participate and take advantage of them at a much higher rate,” he says.

“In terms of Secure 2.0, the biggest impact this bill has is that it brings attention to this issue,” Akabas said of Americans’ lack of emergency savings.

Over the past few years, there has been a “sharp increase” in employers offering emergency savings plans, he said.

Akabas said further legislation could help promote such services.

Akabas said policymakers could encourage emergency savings by making all workplace accounts eligible for automatic enrollment.

The Emergency Savings Enhancement Act, a bipartisan proposal, would raise the annual PLESA contribution limit to $5,000 and expand eligibility to eligible employees, including highly compensated employees. According to the IRS, as of 2026, a highly compensated employee is someone who receives more than $160,000 in compensation from a company or owns more than 5% of a company’s stock.

The bill was recently introduced by the Senate Health, Education, Labor, and Pensions Committee.