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Six ways employers can help employees save for emergencies while protecting retirement outcomes

Inadequate emergency savings can impact productivity and place retirement at risk. Here’s how employers can help.

Download the latest Voya Perspectives paper:  

Building financial resiliency with an emergency savings fund

Many Americans share a common financial vulnerability—a single unplanned expense can disrupt their financial stability because they have little or no emergency savings. However, the problem doesn’t just impact employees—it spills over into the workplace in more ways than one. Let’s take a closer look at emergency savings and how employers can help employees build financial resiliency.

American workers are vulnerable to financial emergencies

Most participants in focus groups conducted by The Pew Charitable Trusts agreed that having enough money to comfortably pay the bills and build savings is a core requirement of a stable financial life.1 But expenses or lost income that families do not plan for, such as from job loss, illness, injury or a major home or vehicle repair, can create significant financial stress. For example:

  • 30% have no emergency savings at all; while 20% have less than three months of emergency savings and only 28% of individuals have six or more months.2 
  • Unexpected expenses are extremely common with 60% of households having experienced a financial shock over the last 12 months.3 

Inadequate emergency savings impacts workplace productivity

Not having enough emergency savings is a major contributor to financial stress, which is the leading stressor in the workplace—more than all of the other stressors combined.4 Financial stress, which can be caused by financial emergencies, affects the mental and physical well-being of employees. This, in turn, impacts how they perform their jobs. It can even influence when they plan to retire. In short, employees’ financial stress hits an organization’s bottom line.

  • Specifically, 47% report financial issues have been a distraction at work, and nearly half of those employees spend three hours or more at work each week dealing with personal finances.5 

A lack of emergency savings puts retirement at risk

In addition to impacting productivity at work, individuals without adequate emergency savings often turn to their workplace retirement plans to meet short-term financial needs. These early withdrawals come with costs. In addition to fees, penalties and taxes, the opportunity costs of reduced savings and potential investment earnings impact long-term retirement outcomes. About half of workers across all age groups think it’s likely they will need to use money from their retirement plans to deal with unexpected expenses.6 While retirement savings seem like an easy source of cash, it could mean selling investments when markets are down, and then missing out on the potential for growth when markets recover. In addition, tapping retirement savings for emergencies often creates two quantifiable problems:

  • Savings rates go down. Participants with inadequate emergency savings were 30% more likely to decrease contribution rates.7 
  • Hardship withdrawals and loans go up. Participants with inadequate emergency savings are 13 times more likely to take a hardship withdrawal than those with adequate savings.8 And participants with inadequate emergency savings are more than three times more likely to take a loan from their retirement plan. They save 10% less than participants who don’t borrow.9 

Six steps employers can take to help employees with emergency savings

As Americans began to experience the financial impact brought on by the COVID-19 pandemic, interest in receiving support and guidance—specifically related to emergency savings—became employees' top priority.10 And employers have a unique opportunity to help employees avoid short-term financial decisions, such as taking retirement plan distributions to cover emergency expenses that could hurt their long-term financial wellness. Solutions can run the gamut from adjustments to existing benefits, to engagement methods or stand-alone programs solely focused on building and maintaining an emergency fund.

  1. Increasing education and communication. Employees need encouragement to save more for emergencies. Communication and guidance on household budgeting, spending and cost cutting plans, along with step-by-step saving strategies can provide the actionable information employees need.
  2. Driving action with tools and calculators. Promoting interactive tools and calculators in conjunction with education initiatives gives employees the ability to turn their knowledge into action.
  3. Consider offering Health Savings Accounts (HSAs).  HSAs provide employees covered by a high-deductible healthcare plan a way to use tax-advantaged dollars to help cover medical expenses, and can act as a general safety net to cover emergency medical expenses. 
  4. Expanding financial wellness programs. Employers who direct more attention to helping employees manage unexpected expenses within their holistic financial programs could be seen by employees and prospects as leaders in offering benefits that workers are asking for today.
  5. Offer an out-of-plan savings account. Many employers are giving their employees access to third-party emergency savings accounts by forming partnerships with a bank, credit union or taxable trust.
  6. Making retirement plan design changes. To strike a balance between suggesting loans as an emergency cash solution and protecting long-term retirement savings, sponsors may consider limiting the number of plan loans allowed. And there is evidence to suggest that limiting loan benefits may encourage better long-term savings behaviors.


Infograph:  American workers are vulnerable to financial emergencies, putting their retirement at risk


For more information on how employers can increase workplace productivity and protect retirement accounts by encouraging employees to save for unexpected expenses, download the latest Voya Perspectives paper:

Building financial resiliency with an emergency savings fund

This information is provided by Voya for your education only. Neither Voya nor its representatives offer tax or legal advice.  Please consult your tax or legal advisor before making a tax-related investment/insurance decision.

Products and services offered through the Voya® family of companies.

1 The Pew Charitable Trusts, American’s Financial Security: Perception and Reality, March 2015.

2 Voya internal data, October 2020.

3 The Pew Charitable Trusts, American’s Financial Security: Perception and Reality, March 2015.

4 PwC, Employee Financial Wellness Survey, 2019.

5 PwC, Employee Financial Wellness Survey, 2019.

6 PwC, Employee Financial Wellness Survey, 2020.

7 Voya internal data, October 2020.

8 Voya internal data, October 2020.

9 Voya internal data, October 2020.

10 Results from an Ipsos survey among adults aged 18+. With additional question content that is specific to Voya Financial. Wave 1 = 1,005 interviews from March 25-26, 2020, Wave 2 = 1,005 interviews from April 23-24, 2020, Wave 3 = 1,007 interviews from May 29 – June 1, 2020, Wave 4 = 1,002 interviews from June 29 – June 30, 2020, Wave 5 = 1,005 interviews from July 30 – July 31, 2020, Wave 6 = 1,005 interviews from September 24 – September 25, 2020, Wave 7 = 1,005 interviews from October 22 – October 23, 2020, Wave 8 = 1,004 interviews from November 19 – November 20, 2020. The data is weighted to be representative of the general adult US population age 18+ according to the most recent census data. The precision of Ipsos online polls are calculated using a credibility interval with a poll of 1,000 accurate to +/- 3.5 percentage points. For more information on the Ipsos use of credibility intervals, please visit the Ipsos website (www.Ipsos.com).