Two Senate proposals differ in their approach to boosting emergency savings, although both come with certain parameters and are linked to 401(k) plan accounts.
However, a separate account would be the preferable of the two so that people would be less likely to make withdrawals from their 401, Antonelli said.Nevertheless, for workers who have access to a 401 or similar workplace plan but don't participate, having emergency funds available could spur them to enroll in their company's retirement plan, said Leigh Phillips, president and CEO of SaverLife, a nonprofit focused on helping households build savings.
In traditional 401 plans, where contributions are made pre-tax, the penalty for withdrawing from an account comes with a 10% tax penalty if the person is under age 59½ .That concern is addressed in state-facilitated retirement programs, which generally auto-enroll workers — those without access to a workplace plan — into Roth IRAs .
Altogether, 46 states have either implemented or considered legislation since 2012 to create retirement savings initiatives to reach workers without a plan at work. More than $476 million is collectively invested through these plans, according to Antonelli's organization.
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