Market Overview

Emergency savings feature can help plan sponsors increase employees' financial wellness, Prudential says


Most Americans don't have enough savings to cover unexpected expenses,
tempting many to make the costly mistake of raiding their workplace
retirement savings plans. Using after-tax contributions to an existing
retirement plan to build savings that can be accessed to cover
emergencies could help, according to Prudential Financial, Inc. (NYSE: PRU).

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63% of Americans don't have enough savings to meet a $500 emergency.

63% of Americans don't have enough savings to meet a $500 emergency.

The need for emergency savings is so critical that it is a key feature
of recently proposed bipartisan legislation, the "Strengthening
Financial Security Through Short-Term Savings Act."

Prudential cites the alarming statistics in a new white paper, "Increasing
Financial Security with Workplace Emergency Savings"
: 63 percent of
Americans can't afford a $500 emergency — the cost of minor car repairs
— and 31 percent of employees would consider retirement plan loans or
withdrawals to cover those expenses.1

In response, Prudential worked with Washington, D.C., nonprofit
organization Prosperity Now to design a potential solution using payroll
deductions to fund after-tax contributions. Prudential Retirement® is
now offering this feature to plan sponsors as part of their holistic
workplace financial wellness package. Financial wellness is realized
when individuals adopt behaviors that help them manage day-to-day
finances, achieve important financial goals, and protect against key
financial risks.

"Making it easier for employees to build savings that can also be used
in an emergency is the natural next step in the evolution of retirement
plan design," said Phil
, president of Prudential Retirement. "A small additional
contribution each pay period may help build a financial cushion and
reduce the effects of 401(k) plan withdrawals and loans that may cut
into employees' retirement savings and increase workforce costs for
employers. For employees that never need to use it, the money eventually
adds to their long-term retirement savings."

The workplace benefits of an emergency savings feature

Emergency savings features through after-tax employee contributions
offer advantages to employers and their employees.

Advantages for employees:

  • Ready access to funds. Employees may be more willing to
    contribute to their retirement plans after-tax, since they can access
    these after-tax savings in an emergency when needed.2
  • Peace of mind. Could reduce stress related to not having money
    for unexpected emergencies.
  • Ease and flexibility. A convenient way to save at the workplace
    and track progress.

Advantages for employers:

  • Optimize benefits spend. Plans are funded by employees and
    leverage existing infrastructure.
  • Reduce leakage from retirement plans. Could help employees
    strengthen their day-to-day financial health which reduces the need to
    raid their pre-tax retirement savings in the event of an emergency.
  • Mitigate the cost of delayed retirements. A one-year increase
    in average retirement age can raise workplace costs 1 to 1.5 percent
    for employers.3
  • Improve employee engagement, morale and productivity. Nearly
    one in three employees say personal finances have distracted them at

For more on emergency savings and Prudential's emergency savings
feature, read "Increasing
Financial Security with Workplace Emergency Savings."

About Prudential Retirement

Prudential Retirement delivers retirement plan solutions for public,
private, and nonprofit organizations. Services include defined
contribution, defined benefit and non-qualified deferred compensation
recordkeeping, administrative services, investment management,
comprehensive employee education and communications, and trustee
services, as well as a variety of products and strategies, including
institutional investment and income products, pension risk transfer
solutions and structured settlement services. With more than 85 years of
retirement experience, Prudential Retirement helps meet the needs of 4.3
million participants and annuitants. Prudential Retirement has $427.6
billion in retirement account values as of March 31, 2018. Retirement
products and services are provided by Prudential Retirement Insurance
and Annuity Company (PRIAC), Hartford, Conn., or its affiliates.

About Prudential Financial, Inc.

Prudential Financial, Inc. (NYSE:PRU), a financial services leader, has
operations in the United States, Asia, Europe and Latin America.
Prudential's diverse and talented employees are committed to helping
individual and institutional customers grow and protect their wealth
through a variety of products and services, including life insurance,
annuities, retirement-related services, mutual funds and investment
management. In the U.S., Prudential's iconic Rock symbol has stood for
strength, stability, expertise and innovation for more than a century.
For more information, please visit


1 McGrath, Maggie,, "63% of Americans Don't Have
Enough Savings to Cover a $500 Emergency," 2016. Prudential, "The State
of Financial Wellness in America," 2017.

2 After-tax contributions to emergency savings are free of
taxes and penalties, but any earnings will generally be subject to taxes
and a federal 10 percent penalty tax if withdrawn before age 59 1/2.

3 Prudential, "Why Employers Should Care About the Cost of
Delayed Retirements," 2016.

4 PwC, "Employee Financial Wellness Survey: 2017 Results."

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