Bill Overview
Title: Enhancing Emergency and Retirement Savings Act of 2022
Description: This bill permits penalty-free distributions, up to $1,000, from tax-exempt retirement plans for emergency personal expenses, limited to one distribution in a calendar year. The bill allows repayment to plans of such distributions over a three-year period.
Sponsors: Rep. Wenstrup, Brad R. [R-OH-2]
Target Audience
Population: People with tax-exempt retirement plans
Estimated Size: 100000000
- This bill affects individuals with tax-exempt retirement plans, which are commonly held in the United States.
- Tax-exempt retirement plans such as 401(k)s and IRAs are prevalent among working individuals in many developed countries, but especially in the US.
- The bill specifically allows for penalty-free early withdrawal for emergency expenses, affecting mainly those who may find themselves in urgent financial need.
Reasoning
- The policy specifically targets individuals with tax-exempt retirement plans, allowing them to withdraw up to $1,000 without a penalty for emergencies. This would primarily benefit those who may experience sudden financial needs and have some retirement savings to draw from.
- With the budget constraints, it is important to assess the potential broadness of the impact. Not every person with a tax-exempt retirement plan will use this option, as it is meant for emergencies.
- Given the budget of $50,000,000 in the first year, and assuming each withdrawal is the maximum $1,000, the program can serve up to 50,000 individuals in the first year. Over ten years, an average of 500,000 individuals can benefit annually, aligning with the $500,000,000 budget.
- The wellbeing scores will vary based on whether individuals face emergencies and the extent to which accessing these funds helps mitigate their stress and financial strain.
Simulated Interviews
Teacher (Texas)
Age: 45 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- I feel relieved knowing I can access some of my retirement savings without penalty if a family emergency arises.
- This policy gives me peace of mind, especially with two kids to support and unexpected expenses cropping up.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 7 | 6 |
| Year 10 | 6 | 5 |
| Year 20 | 5 | 4 |
Factory worker (Ohio)
Age: 58 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- Being able to use some of my retirement money for an emergency is a huge relief.
- My health costs are unpredictable; this policy might just be my safety net.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 7 | 5 |
| Year 10 | 6 | 4 |
| Year 20 | 5 | 4 |
Software engineer (California)
Age: 30 | Gender: female
Wellbeing Before Policy: 9
Duration of Impact: 2.0 years
Commonness: 18/20
Statement of Opinion:
- I don't see myself needing to use this policy. I already have sufficient savings for emergencies.
- Having the option is nice, but I hope I never have to use it.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 7 |
Retired veteran (Florida)
Age: 62 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 0.0 years
Commonness: 5/20
Statement of Opinion:
- It would have been nice to have this option earlier when money was tighter.
- As a retiree, access to funds without penalty is a comfort even now.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Freelancer (Oregon)
Age: 29 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 12/20
Statement of Opinion:
- This policy could be helpful if my partner or I face emergency expenses while still paying off student loans.
- Knowing there's an option to get some quick cash from my IRA is slightly reassuring.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 6 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 4 |
Barista (New York)
Age: 25 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 0.0 years
Commonness: 20/20
Statement of Opinion:
- The policy is not really for me right now since I don't have a retirement plan.
- Maybe it'll be useful once I start saving for retirement.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 6 | 6 |
| Year 20 | 7 | 7 |
Nurse (Georgia)
Age: 52 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 7.0 years
Commonness: 13/20
Statement of Opinion:
- Taking out money for unexpected expenses without penalty helps me sleep better at night.
- Caregiving is unpredictable, and this policy could provide much-needed support in crisis situations.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 6 | 5 |
Sales manager (Illinois)
Age: 38 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 14/20
Statement of Opinion:
- I hope to never need to tap into retirement funds for emergencies, but it's great to have that flexibility.
- This policy adds more personal security during uncertain times.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Small business owner (Washington)
Age: 40 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 15.0 years
Commonness: 11/20
Statement of Opinion:
- The flexibility to access funds without penalty could keep my business and family afloat during hard times.
- It's a thoughtful policy for those trying to balance personal and professional challenges.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 5 |
Engineer (Colorado)
Age: 47 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 3.0 years
Commonness: 16/20
Statement of Opinion:
- While I have stable finances now, being able to withdraw if necessary provides an extra layer of security.
- It's good to know there's a safety net without financial penalties.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 6 | 6 |
Cost Estimates
Year 1: $50000000 (Low: $30000000, High: $100000000)
Year 2: $50000000 (Low: $30000000, High: $100000000)
Year 3: $50000000 (Low: $30000000, High: $100000000)
Year 5: $50000000 (Low: $30000000, High: $100000000)
Year 10: $50000000 (Low: $30000000, High: $100000000)
Year 100: $50000000 (Low: $30000000, High: $100000000)
Key Considerations
- The policy's long-term cost is mitigated by allowing participants to repay withdrawals over three years, keeping retirement savings intact.
- Wide adoption by up to 100 million eligible participants can cause a significant cost variance, depending on usage rate.
- Complexity in administrative overhead for implementing and monitoring such flexible withdrawal provisions.