Business Wire July 24, 2018
NEWARK, N.J.--(BUSINESS WIRE)-- 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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multimedia. View the full release here: https://www.businesswire.com/news/home/20180724005861/en/
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 Waldeck, 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 work.4
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 news.prudential.com.
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1 McGrath, Maggie, Forbes.com, “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.”
View source version
on businesswire.com: https://www.businesswire.com/news/home/20180724005861/en/
MEDIA:
Prudential Financial, Inc.
Monique Freeman, 973-802-3745
monique.freeman@prudential.com
Twitter: @MoniqueR_PruPr
Prudential Financial, Inc.
Monique Freeman, 973-802-3745
monique.freeman@prudential.com
Twitter: @MoniqueR_PruPr
Source: Prudential
Financial, Inc.
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