Why the bipartisan Lankford-Bennet bill is key to solving Americas savings crisis

What do you want to know

  • The Emergency and Retirement Savings Enhancement Act would give savers easier emergency access to funds from employer-sponsored retirement plans and IRAs.
  • The sponsors are Sens. James Lankford, R-Okla., and Michael Bennet, D-Colo.
  • The author says the bill would remove a major barrier to increased use of retirement savings plans by workers.

Record inflation is weighing heavily on Americans’ ability to save. Fortunately, Congress is well positioned to help.

That’s why Nationwide applauds the Senate Finance Committee for adding the Improved Retirement and Emergency Savings Actwhich is co-sponsored by Sens. James Lankford, R-Okla., and Michael Bennet, D-Colo., at EARN Law.

Nationwide is calling on Senate and House leaders to move quickly to finalize SECURE 2.0, including this important emergency savings reform, and forward it to the President’s office for his signature.

Now is the time to reform emergency savings.

Recent US Department of Commerce data reveals that the personal savings rate fell to 6.2% in March, the lowest level in about a decade.

A recent survey also found that 56% of Americans are unable to cover an unexpected $1,000 bill with savings.

Perhaps this is why finance professionals also support an emergency savings option for their clients.

In reality, National Retirement Institute Research found that 94% of financial professionals agree that allowing plan members to withdraw or use limited pension plan contributions for critical short-term financial needs without an early distribution penalty would help improve the financial security of plan members. Americans.

With costs rising, many American workers find themselves dipping into their savings to pay for basic necessities.

Add an unexpected expense and you’re one step closer to personal financial crisis and long-term financial security.

The good news is that Congress has the opportunity to apply a simple, innovative, and bipartisan approach that allows Americans to save more for emergencies while simultaneously building long-term savings.

The Improved Emergency and Retirement Savings Act is a bipartisan solution.

Lankford and Bennet introduced the Improving Emergency and Retirement Savings Act of 2021and a companion bill was introduced in the House by Reps. Brad Wenstrup, R-Ohio, and Tom Suozzi, DN.Y.

This well-crafted, bipartisan, bicameral legislation would encourage participation in pension plans by giving them additional flexibility and penalty-free access to funds in an emergency.

Here’s how it would work:

  1. Those who save in workplace retirement plans or an IRA are allowed to make one “emergency distribution” without penalty per calendar year.
  2. Distributions are limited to amounts vested in excess of the minimum account balance of $1,000, with a maximum annual withdrawal of $1,000.
  3. Plan participants would be required to replenish the amount withdrawn from the plan before an additional emergency distribution from that same plan would be permitted.

Additionally, this flexibility will encourage more Americans to save by removing the hesitation that money is inaccessible in an emergency.

The bill offers a proven solution that works.

In the first year of the pandemic, lawmakers overwhelmingly approved a change allowing pandemic-affected retirement savers to immediately withdraw a portion of their savings from a 401(k) or IRA – without tax penalty.

Many Americans have relied on this flexibility to weather the financial hardship brought on by the pandemic.

That emergency assistance expired at the end of 2020. Congress now has the option to make that same concept permanent and allow workers to tap into a small portion of their retirement savings for emergency expenses.

The reality is that common sense liquidity in retirement accounts can not only bring immediate relief to millions of Americans, but also encourage more Americans to save for retirement in the first place.

In fact, the two are inextricably linked.