More Americans are finding that a single unexpected bill can derail their budgets — and lawmakers and employers are pushing new tools to prevent that. Recent surveys and federal data show many workers lack even a small cushion, prompting changes to retirement rules and growing interest in employer-run emergency accounts.
More than half of U.S. workers reported they couldn’t cover a modest emergency. A June survey of 1,028 employees by SecureSave found 55% lacked the cash to handle a $500 surprise expense, and 41% said they had skipped essentials — from medical care to car repairs — because they didn’t have savings to fall back on.
Why this matters now
When households don’t have a buffer, they turn to credit, retirement accounts or forgo necessary spending, which raises longer-term financial risks. The federal government’s 2025 report on household economic well‑being, based on responses from more than 13,000 people in October, showed just 63% of adults could meet a $400 emergency with cash, savings or a credit card paid off at the next statement — a share that has barely budged since the pandemic rebound.
Inflation pressures and higher borrowing costs add to the strain: the consumer price index registered a 3.4% annual rise in July, and average gas prices are above $4 per gallon for this time of year, according to GasBuddy. At the same time, household debt remains elevated — the New York Fed reported total household debt of $18.8 trillion in the second quarter, with auto and credit card balances near record levels and delinquency rates inching up.
Retirement accounts are leaking
Rising living costs are pushing some savers to tap retirement funds. Vanguard’s data show hardship withdrawals from defined contribution plans rose to about 6% of participants in 2025, up from 2% in 2020. Policymakers and researchers warn that draining retirement savings to cover short-term needs — what analysts call retirement leakage — undermines long-term financial security.
Shai Akabas, vice president of economic policy at the Bipartisan Policy Center, says the trend highlights the need for dedicated emergency options in the workplace rather than relying on retirement accounts as the only fallback.
New rules aim to create a safety net
The 2022 Secure 2.0 law introduced several provisions designed to help workers build short‑term savings without sacrificing retirement progress. Under the law, defined contribution plan participants may withdraw up to $1,000 per year for emergencies without the usual penalties, though that withdrawal generally must be repaid within three years before another penalty‑free withdrawal is allowed.
Secure 2.0 also authorized pension‑linked emergency savings accounts, known as PLESAs, which can be automatically enrolled and allow annual contributions that are tax‑ and penalty‑free on withdrawal. For 2026 the contribution cap is set at $2,600.
Implementation has been slow. Only about 4% of 401(k) plans currently offer the $1,000 emergency withdrawal, according to Vanguard, and many record keepers waited for regulatory clarity before building PLESAs into their platforms. Craig Copeland of the Employee Benefit Research Institute says that delay — and the complexity of adding new features — has kept PLESAs from reaching scale.
Still, some firms have moved ahead: T. Rowe Price announced in April 2025 that it was launching a PLESA product, and a growing number of employers are offering separate workplace emergency savings programs through vendors such as SecureSave and Sunny Day Fund, as well as pilots from major asset managers.
- Key survey figures: 55% of workers can’t cover a $500 emergency (SecureSave, June 2025); 63% could cover $400 in the Fed’s Oct. 2025 survey.
- Debt snapshot: Total household debt $18.8 trillion Q2 2025; auto loans $1.71 trillion; credit cards $1.26 trillion.
- Retirement behavior: Hardship withdrawals rose to 6% of participants in 2025 (Vanguard).
- Policy toolset: Secure 2.0 allows $1,000 penalty‑free emergency withdrawals and permits PLESAs with a $2,600 cap in 2026; proposed legislation would raise that cap to $5,000.
What lawmakers are considering next
Federal lawmakers are weighing further steps to expand workplace emergency saving. The bipartisan Emergency Savings Enhancement Act, recently advanced out of the Senate HELP Committee, would raise the PLESA annual contribution limit to $5,000 and broaden eligibility so more employees — including higher‑paid workers who currently face limits — could participate.
Proponents argue that wider automatic enrollment and higher contribution limits would make it easier for workers to build liquid buffers, reducing reliance on high‑cost credit or retirement withdrawals. Opponents or cautious observers note implementation and record‑keeping hurdles remain, and employers must still decide whether to offer the accounts and how to integrate them with payroll systems.
For employers, facilitating a payroll deduction to a separate emergency account can be an inexpensive way to help employees, and early adopters report robust participation. That uptake could matter for employers too: fewer emergency‑related work disruptions and less financial stress among staff can translate into lower absenteeism and higher productivity.
Watch for two developments in the coming months: how the Senate and House handle the Emergency Savings Enhancement Act, and whether more plan providers, record keepers and major employers move from pilot programs to full rollouts of workplace emergency savings. Those shifts will determine whether the new rules translate into practical, on‑the‑ground relief for households still struggling to cover small but disruptive bills.
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Jordan Keller specializes in analyzing the US financial markets. With concrete recommendations, he helps you secure and boost your investments by providing strategies that adapt to market fluctuations.