Under the Emergency Savings Act, employers offering a defined contribution plan, like a 401(k), have the choice to let workers put cash in an interest-bearing emergency savings account. Workers put in after-tax and can pull it out penalty-free any time.
Americans trying to save some cash for unforeseen expenses are up against a lot — months of red-hot inflation, wages that don’t keep up, the sheer difficulty of delayed gratification in a time when people spend billions of dollars online in one day.
— Suze Orman She does not hold out much hope for people doing that, especially when there is so much pressure to keep up with the latest trends, and complete the holiday gift shopping. “It won’t happen, it has never happened and unless employers start to help employees do that, we’re heading, really, down hill very fast,” she said.
Now for the good news from Orman, who as speaking Tuesday at a panel run by the Bipartisan Policy Center: If employers did help hook up employees with emergency savings accounts, Orman thinks many workers would take up the offer for easy access to an emergency savings account. And they’d also likely reserve the cash they are putting aside solely for unplanned expenses, she said.
If an employee leaves, they can take the money as cash or roll it into a Roth IRA or Roth defined contribution plan at their next employer. Roth IRAs and the like are funded with after tax money, as opposed to traditional IRAs.
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