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SECURE Act 2.0 updates aim to help families build and access savings

October 11, 2022
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As inflation pushes prices of nearly everything higher, more workers and working families are feeling the squeeze in their household budgets. Many people are dipping into their personal savings to cover essential expenses. An out-of-the-blue expense – think car problems or emergency medical care – could make this situation worse.

In the last two years, we have seen first-hand how a financial crisis can place significant stress on workers and families. For instance, as many people lost jobs and income in the early days of the pandemic, hardship withdrawals from workplace retirement plans surged.

This was a wake-up call to all of us in the financial services industry; many of the people we serve are not adequately prepared for a financial emergency, which ultimately places their future financial security at risk.

During this time, the state of Americans’ personal savings has not improved. The personal savings rate hovers at its lowest rate in about a decade, according to data from the Commerce Department. Moreover, a recent Nationwide Retirement Institute® survey of U.S. families found that 42% wouldn’t be able to cover an unexpected expense of $1,000. This percentage is much higher for younger families in Generation Z; 69% of survey respondents said they couldn’t pay for a $1,000 unexpected expense.

How families cope with financial challenges

While inflation ranked as the top financial challenge in our survey of U.S. families, the lack of savings for emergencies was a concern for nearly one-third of those surveyed.

As rising costs of living compound the savings challenge, some families are making difficult choices about budgets, weighing the trade-off between covering short-term immediate expenses and saving for the future. Some of these actions could be detrimental to their long-term financial security. For example, 10% of the families in our survey said they have already decreased retirement plan contributions to help cope with rising inflation. Another 9% said they had withdrawn funds or taken a loan from their retirement savings to help them manage their household expenses.

Americans have many ways to build savings. One of the easiest is to save through workplace retirement plans, where people can put pre-tax money aside on a regular, consistent basis with every paycheck. However, one of the barriers to participation in workplace retirement plans is the inability to access these savings prior to retirement age; some workers aren’t comfortable tying up their money in an account where they could be penalized for an early withdrawal in case of an emergency.

Improving access to savings

Recent legislative activity in Washington, D.C., aims to help workers overcome this barrier. Last year, discussions among senators opened the door to allowing emergency savings withdrawals for participants in workplace and individual retirement plans. Out of these conversations came the bipartisan Enhancing Emergency and Retirement Savings Act of 2021, introduced to create a mechanism for penalty-free access to retirement plan funds in an emergency situation.

These provisions would be available to all workplace retirement plan participants—including 401(k), 403(b) and 457 plans—as well as individuals saving through IRAs. Here’s how the rules would work under the proposed legislation:

  1. Anyone saving through a workplace retirement plan or an IRA could take one emergency distribution up to $1,000 in a calendar year without penalty.
  2. The account must maintain a minimum vested balance of $1,000 at all times and the distribution must come from the vested balance beyond that minimum.
  3. The account owner would be required to replenish the emergency distribution amount before another emergency distribution from the same plan would be permitted.

This proposal was successfully included in the Senate Finance Committee’s Enhance American Retirement Now (EARN) Act, which is one of the three total pieces of SECURE 2.0. As of this writing, the House bill (Securing a Strong Retirement Act) and two Senate bills (the EARN Act and the RISE & SHINE Act) are being combined into the final SECURE Act 2.0 package, with an eye toward passing the entire bill by the end of this year. It’s vital that Congress include the Emergency Savings provision and pass SECURE 2.0 this year to help America’s savers build toward financial security.

Support and opportunities for financial professionals and plan sponsors

As the experience at the outset of the COVID pandemic showed, American workers would value ready access to their retirement savings to help them in times of financial emergency. Returning to the recent Nationwide Retirement Institute survey, over 70% of U.S. families told us they would likely contribute to a retirement savings account that allowed them to withdraw up to $1,000 for emergency purposes.

Enshrining this benefit in legislation would be a big step toward helping build a greater financial security for more Americans. Specifically, this change would remove a common barrier for retirement savings plans among low- and middle-income workers, many of whom are reluctant to join their workplace retirement plans because they want ready access to their savings if they need it. Many families struggle with the either/or choice of saving for possible short-term emergency spending needs or saving for their long-term financial future. This provision would essentially eliminate this either/or choice and allow savers to do both simultaneously. Plus, the ability to access retirement savings without penalty would help many people avoid digging themselves into a financial hole when an unplanned expense comes up.

Retirement plan sponsors would have the option to offer this emergency savings feature to participants, and many employers would likely do so as it would remove an obstacle to participation for many workers. If implemented, it would likely encourage workers to begin saving or save more into their workplace retirement plan.

In a 2021 Nationwide Retirement Institute® survey1, nine out of ten financial professionals said they wanted to see an emergency savings provision included in the next retirement savings legislation. Financial professionals largely support these new provisions because they see the opportunity to help clients improve their future financial security, both in the short and long term. And with many families seeking to better understand their financial choices, financial professionals have an opportunity to help clients make sense of these changes if they become law and be a valuable partner in their future financial success.

To help financial professionals like you and your plan sponsor clients learn more about the implications of the pending retirement legislation package on your business, watch a replay of the webinar hosted by Nationwide Retirement Solutions and our Advanced Consulting Group where we discuss the benefits of key proposed SECURE 2.0 Act provisions, such as emergency savings for participants, and share insights you can use in conversations with clients.


We applaud the actions taken by the House of Representatives to pass the Securing a Strong Retirement Act in March 2022 and the Senate Finance and HELP Committees for their work on the EARN Act and the RISE & SHINE Act. As the end of the 117th Congress approaches, we urge both chambers to finish the important bipartisan work of finalizing this package and sending it along to President Biden for signature by year-end. We are optimistic that the new emergency savings and other key provisions will help promote increased savings and help strengthen the financial security for more Americans, and the time for that is now.

Sources and Disclosure

  • 1

    Nationwide Financial Secure Act Flash Poll (in partnership with Edelman Data and Intelligence), February 2021

  • Federal income tax laws are complex and subject to change. The information is based on current interpretations of the law and is not guaranteed. Nationwide and its representatives do not give legal or tax advice. Please consult an attorney or tax advisor for answers to specific questions.

    Nationwide Investment Services Corporation (NISC), member FINRA, Columbus, Ohio. The Nationwide Retirement Institute is a division of NISC.

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