37% of Americans don’t have $400 in liquid savings. That percentage increases for women to 58% and for Black households to 72%.¹

And where there’s a short-term financial stability problem, long-term financial stability problems aren’t far behind. BlackRock’s Emergency Savings Initiative found that workers with inadequate emergency funds are 13 times more likely to take a hardship withdrawal from their 401(k)s. The good news is, not only do 72% of workers say they would participate in an emergency savings program,² workers with emergency savings are 70% more likely to contribute to their company-sponsored retirement plan.³

In our series with the BlackRock Emergency Savings Initiative and Commonwealth, we examine this emergency savings benefit—the why, the how, and the who. We look at:

• In-plan and out-of-plan solutions, and what employers may want to consider when selecting one or the other: Does it matter that participants have immediate liquidity? That it’s connected to a retirement plan? That it is eligible for auto-enrollment?
• Incentive structures, including rewards and matching: 87% of workers say they would participate in an emergency savings program if an employer match was offered.⁴
• Awareness and engagement strategies, such as targeted communications and peer-to-peer messaging.
• Demographic data in terms of understanding factors such as the frequency of hardship withdrawals and retirement participation.
• Two new Secure 2.0 provisions regarding emergency withdrawals and an in-plan emergency savings program.

Advisors and consultants can play an important role for that last bullet, helping plan sponsors with navigating these new provisions, understanding the policies, and implementing their solutions.

85% of DC consultants believe that the adoption of in-plan emergency savings programs will increase in the next 3 years,⁵ so expect more and more plan sponsors to express interest. It’s an opportunity to build meaningful relationships with sponsors in various stages of adopting a solution.

Finally, we look at case studies from two large employers who implemented emergency savings programs. UPS, for example, found that employees were 2x as likely to increase contribution to their retirement account if participating in the emergency savings program, and ADP saw a 3.5x increase in monthly average number of new users.

Many other large employers—Best Buy, Starbucks, and Delta, for example—have also started to introduce emergency savings programs, and it is projected that by 2026 more than 40% of plan sponsors will offer one to their employees.²

“Emergency savings is important because it helps our people prepare in their financial wellness,” said UPS Global Retirement Strategy and U.S Benefits Director B.J. Dorfman. “We just want to make it easier for people to save for those emergency situations.⁶”

---

¹ Federal Reserve, Report on the Economic Well-being of U.S Households, 2022

² Commonwealth, “Incentives to Increase Emergency Savings Enrollment”, 2023

³ Commonwealth and DCIIA, “Emergency Savings Features that Work for Employees Earning Low to Moderate Incomes”, 2022

⁴ “AARP Public Policy Institute, “Saving at Work for a Rainy Day. Results from a National Survey of Employees”, 2018

⁵ T. Rowe Price 2023 Defined Contribution Consultant Research Study

⁶ “Securing Americans’ Financial Future”, uploaded by Commonwealth, 2023, www.youtube.com/watch?v=aiUTgDXpDvs(opens in a new tab)

This material is provided for educational purposes only and should not be construed as research. The information presented is not a complete analysis of the global retirement landscape. The opinions expressed herein are subject to change at any time due to changes in the market, the economic or regulatory environment or for other reasons.

The material does not constitute investment, legal, tax or other advice and is not to be relied on in making an investment or other decision.

This material does not constitute a recommendation by BlackRock, or an offer to sell, or a solicitation of any offer to buy or sell any securities, product or service. The information is not intended to provide investment advice. BlackRock does not guarantee the suitability or potential value of any particular investment.

Investing involves risk, including possible loss of principal.

Asset allocation models and diversification do not promise any level of performance or guarantee against loss of principal.

FOR INSTITUTIONAL OR FINANCIAL PROFESSIONAL USE ONLY.

©2024 BlackRock, Inc. or its affiliates. All rights reserved. BLACKROCK is a trademark of BlackRock or its affiliates. All other trademarks are those of their respective owners.