Bill Overview
Title: Emergency Savings Act of 2022
Description: This bill permits employer-sponsored retirement plans to offer participants a pension-linked emergency savings account (1) with a maximum account limit of $2,500, and (2) from which withdrawals are not subject to a tax penalty.
Sponsors: Sen. Booker, Cory A. [D-NJ]
Target Audience
Population: Individuals with employer-sponsored retirement plans
Estimated Size: 116000000
- The bill targets individuals who have employer-sponsored retirement plans.
- A significant number of working adults in the United States have access to employer-sponsored retirement plans, like 401(k) and 403(b) plans.
- There are approximately 116 million American workers with access to defined contribution plans as per data from the Investment Company Institute.
- This bill aims to enhance financial security by allowing liquidity without penalties for emergencies.
- The legislation affects these workers by providing them an option for emergency savings directly linked to their retirement plans.
Reasoning
- The population affected by this policy is those with access to employer-sponsored retirement plans, providing a substantial number of potentially impacted individuals. Given that approximately 116 million workers have access to these plans, it's crucial to consider a diverse demographic in terms of age, income, and job type.
- The policy aims to improve financial security by allowing immediate and penalty-free access to emergency funds. The allocation of $50,000,000 in the first year suggests a targeted, albeit limited, rollout, possibly focusing on sectors or specific demographics that might benefit the most from an emergency fund linked to retirement savings.
- Over 10 years, with a budget of $500,000,000, the policy can gradually expand its reach, potentially impacting the broader population of eligible workers. The policy’s impact on self-reported wellbeing would likely vary depending on individuals' financial stability before implementation.
- The inclusion of a wide range of perspectives in the sample interviews will reflect differing degrees of reliance on emergency savings and varied expectations of the policy's benefits.
Simulated Interviews
Software Engineer (New York, NY)
Age: 34 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 12/20
Statement of Opinion:
- I like the idea of having an emergency fund linked to my retirement account, as I sometimes struggle to keep a separate savings fund.
- This policy could make it easier for me to manage unexpected expenses without dipping into my retirement savings.
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 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 8 | 7 |
Teacher (Chicago, IL)
Age: 45 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 15/20
Statement of Opinion:
- As a teacher, my salary doesn't leave much room for unexpected costs. This policy could be extremely helpful for us.
- I'd worry about emergencies, especially with college expenses. This could reduce that worry significantly.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 9 | 5 |
Graphic Designer (San Francisco, CA)
Age: 29 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- I frequently live paycheck to paycheck, so this policy sounds beneficial.
- Having liquid savings would help feel less stressed about surprise expenses, like car repairs.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 4 |
| Year 10 | 8 | 4 |
| Year 20 | 6 | 5 |
Nurse (Seattle, WA)
Age: 58 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 14/20
Statement of Opinion:
- I'm close to retirement but having the option for an emergency fund is comforting.
- This change might help future nurses who aren't as financially secure as I am.
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 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Construction Worker (Houston, TX)
Age: 50 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 0.0 years
Commonness: 5/20
Statement of Opinion:
- This policy doesn't affect me as I don't have a retirement account.
- I would like more assistance options for workers like myself to deal with emergency costs.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 4 | 4 |
| Year 2 | 4 | 4 |
| Year 3 | 4 | 4 |
| Year 5 | 4 | 4 |
| Year 10 | 4 | 4 |
| Year 20 | 4 | 4 |
Accountant (Miami, FL)
Age: 62 | Gender: female
Wellbeing Before Policy: 9
Duration of Impact: 3.0 years
Commonness: 13/20
Statement of Opinion:
- Not much changes for me since I'm quite financially secure at the moment.
- Though, it's a safeguard against potential unforeseen large medical expenses.
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 | 9 | 9 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 9 |
Project Manager (Denver, CO)
Age: 37 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 16/20
Statement of Opinion:
- I think this policy will give us more peace of mind when dealing with urgent issues.
- The flexibility will not force me to touch retirement funds unnecessarily.
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 | 9 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Marketing Specialist (Phoenix, AZ)
Age: 41 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 12/20
Statement of Opinion:
- Caring for a parent makes emergency funds essential, so this policy would be very useful to me.
- I'm hopeful the policy could provide a financial cushion that helps manage caregiving expenses.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 5 |
| Year 20 | 8 | 5 |
Barista (Minneapolis, MN)
Age: 28 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- I don't currently contribute enough to see significant effects from this policy, but it might encourage me to start using my 401(k) again.
- An emergency fund within the 401(k) might make it more attractive.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 6 | 5 |
Retail Manager (Atlanta, GA)
Age: 55 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 2.0 years
Commonness: 9/20
Statement of Opinion:
- We've built a comfortable savings so this policy doesn’t change much for us.
- It could be more valuable for younger families trying to build up their savings.
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 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Cost Estimates
Year 1: $50000000 (Low: $30000000, High: $70000000)
Year 2: $50000000 (Low: $30000000, High: $70000000)
Year 3: $50000000 (Low: $30000000, High: $70000000)
Year 5: $50000000 (Low: $30000000, High: $70000000)
Year 10: $50000000 (Low: $30000000, High: $70000000)
Year 100: $50000000 (Low: $30000000, High: $70000000)
Key Considerations
- Behavioral impact on savings and withdrawals is uncertain, making fiscal projections challenging.
- Administrative costs for plan sponsors and their willingness to adopt these changes significantly affect the uptake rate.
- Potential benefits to the economy through enhanced financial resilience amongst workers if adopted widely.