Both workers and employers are interested in establishing an automatic emergency savings account that would work alongside a workplace defined contribution (DC) plan, according to LIMRA Secure Retirement Institute research.
The study was inspired by Harvard University Professor David Laibson’s remarks at the 2016 Retirement Industry Conference. Laibson proposed that an automatic emergency savings account could be funded up to a specific amount, after which time the money would automatically go into a retirement savings plan. This approach could help fund financial emergencies and prevent early withdrawals of retirement funds, which can come with penalties and threaten long-term retirement security.
The Institute’s study finds two-thirds of workers are interested in having access to an automatic emergency savings account. The research also finds 89% of employers are interested in offering the account, with larger employers more likely to be very interested.
The survey results show that the concept of the automatic emergency savings account has wide appeal. Interest in the accounts was consistent across all household income levels and DC plan participation.
Results are based on a September 2016 survey of 801 workers with access to a DC plan through their current employer and an October 2016 survey of 1,095 DC plan sponsors with 10 or more employees.