Mar 8, 2026
With the cost of living increasing nearly 25% since December 2020 (1), many Americans are struggling to get by.
And when Americans struggle to afford basic living essentials, saving money can become extremely difficult. In fact, just 47% of Americans report that they’ve saved enough cash to cover a $1,000 emergency expense, according to a Bankrate survey (2).
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Meanwhile, new research from Vanguard shows that very few employers are combining their 401(k) plans with new emergency savings options for employees (3). Here’s what the Secure Act 2.0 provisions allow companies and workers to do, and why many employers are slow to adopt these options.
Secure Act 2.0 emergency savings options explained
In 2024, the Secure Act 2.0 offered two new options for employers to help their workers with saving money for emergencies.
The first option is the ability to withdraw $1,000 per year from retirement savings, penalty-free (and pay it back over a three-year period). The second option is an emergency savings account that’s linked to a 401(k), with a contribution limit of up to $2,600 for 2026 (4).
However, only 4% of companies have adopted the emergency 401(k) withdrawals, Vanguard found, while the emergency savings accounts that are linked to 401(k)s — which are known as pension-linked emergency savings accounts — have generated “minimal to no interest from plan sponsors.”
The reluctance to adopt these emergency savings options seems to be that many companies (94%, as of 2024) already have some emergency withdrawal plans in place, according to Vanguard (5). Another issue could be that among the 4% of companies that have adopted the Secure Act 2.0 options, only 0.4% of participants have initiated an emergency withdrawal.
CNBC also found that it may be difficult for companies to administer these plans, as high-earning employees — those earning $160,000 or more per year — are excluded from eligibility, while other managed solutions are already offered (6).
“If a plan sponsor wants to move forward with an emergency savings program at their company, they’re going to analyze the options available, and part of that [analysis] will be what’s easiest to implement,” said Will Hansen, executive director of the Plan Sponsor Council of America.
“A $1,000 withdrawal is easier than a [401(k)-linked account] and an account not affiliated with the plan could be an easier feature as well.”
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Why emergency funds are essential
While 27% of Americans reportedly have enough emergency savings to cover six months of expenses, 24% have no emergency savings at all, according to Bankrate (2).
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What’s worse, 29% of Americans say they have higher credit card debt than emergency savings, a situation that could prevent them from paying off debt if a financial emergency were to arise.
In general, financial experts recommend having three to six months’ worth of living expenses in your emergency fund in case of job loss, unexpected expenses or a health scare.
Related: No savings yet? It's not too late to start
How to save for emergencies with or without your employer
While few employers are taking advantage of the Secure Act 2.0’s new options, they seem to be aware of the fact that emergency funds are essential. With this in mind, you can ask your employer about emergency savings programs that it offers, or advocate for one through payroll deduction.
Some workers may feel that another deduction — coming on top of health insurance, taxes, 401(k)s and other line items — will put a serious dent in their monthly budgets, but modest contributions to an emergency savings program could save them from going into debt down the road. Plus, automating the contributions takes some of the sting out and ensures a disciplined approach to saving.
If your employer is reluctant to offer an emergency withdrawals or savings program, it’s up to you to set aside funds each month, just as you would with contributions to your 401(k). It’s wise to choose a high yield savings account so that you can earn interest on your growing nest egg, but you can also choose to use savings vehicles like a certificate of deposit (CD) — just remember that this option requires locking in your money for a set period.
Finally, if you’re struggling to find extra money in your budget for savings, reviewing your spending carefully each month (with an app or on paper) can give you insight into where to trim so that you can contribute to your emergency fund. Even $100 a month can add up over time, while giving you peace of mind the next time you need to take your car to the mechanic or bring a sick dog to the vet.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Federal Reserve (1); Bankrate (2); Vanguard (3, 5); IRS (4); CNBC (6).
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Rebecca Holland is dedicated to creating clear, accessible advice for readers navigating the complexities of money management, investing and financial planning. Her work has been featured in respected publications including the Financial Post, The Globe & Mail, and the Edmonton Journal.
