Sharp Decline in Emergency Savings Puts Working Households at Risk, Orman Warns

Suze Orman delivered remarks at AOL’s Build speaker series held at AOL Studios in New York.

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Financial experts routinely recommend establishing an emergency savings fund as the initial step toward financial stability.

Nevertheless, surveys repeatedly indicate that amassing a sufficient cash reserve for unforeseen events remains a challenge for many people.

A recent SecureSave survey found that over half of workers — 55% — lack sufficient savings to meet a $500 emergency expense, highlighting a gap in workplace emergency savings programs.

The shortfall creates notable financial pressure, the June survey of 1,028 workers revealed, with 41% reporting that they have forgone essential costs — such as medical care, food, or vehicle repairs — due to inadequate savings.

“We are facing greater risk than ever before, because even workers who have jobs and steady paychecks struggle to make ends meet,” said personal finance authority Suze Orman, co‑founder of SecureSave.

Additional research similarly demonstrates that accumulating extra cash is often difficult to achieve.

The Federal Reserve’s 2025 study on household economic wellbeing indicated that 63% of adults could cover a $400 emergency cost using cash, savings, or a promptly paid credit‑card balance, a figure that has remained unchanged over the past three years after peaking at 68% in 2021.

The survey, which gathered responses from over 13,000 consumers, was conducted in October.

Recent data show that many consumers are experiencing budgetary pressure.

The most recent consumer price index indicated a 3.4% annual inflation rate in July, with price growth moderating across many categories, though still above the Federal Reserve’s 2% target. At the same time, average gasoline prices have risen above $4 per gallon, marking the highest level ever recorded for this season, according to GasBuddy.

Total household debt reached $18.8 trillion in the second quarter, according to the Federal Reserve Bank of New York, representing an increase of $4.6 trillion since the end of 2019, before the pandemic recession. The figure was marginally lower — down 0.1% or $13 billion — from the first quarter, the central bank reported.

Auto loan balances increased to $1.71 trillion in the second quarter, Federal Reserve data show, while credit‑card balances rose to $1.26 trillion, approaching the $1.28 trillion peak recorded in the fourth quarter of 2025. The central bank noted that delinquency rates for both auto loans and credit cards remain elevated.

As living costs have risen, retirement savers are increasingly using hardship withdrawals — funds they can access for qualifying reasons such as emergencies, college expenses, medical costs, or purchasing a primary residence — according to Vanguard.

The proportion of Vanguard defined‑contribution plan participants who have taken hardship withdrawals rose to 6% in 2025, up from 2% in 2020. Higher inflation and interest rates may be driving this strain, a recent Vanguard report suggests, and plan designs may also incentivize such withdrawals.

“Leakage from retirement accounts is becoming an increasingly pressing issue,” said Shai Akabas, vice president of economic policy at the Bipartisan Policy Center, a Washington‑based think tank dedicated to bipartisan solutions.

“A primary remedy is to develop tools that enable employees to set aside emergency savings,” he added.

Secure 2.0 opened new paths for emergency savings

Enacted in 2022, the Secure 2.0 legislation introduced provisions designed to help employers foster emergency savings among workers.

Participants in defined contribution plans can withdraw up to $1,000 per calendar year for emergency expenses without incurring penalties; however, the amount must typically be repaid before any further emergency withdrawals can be taken within the subsequent three years.

The law also permits automatic enrollment of employees into pension‑linked emergency savings accounts (PLESAs), which may receive contributions of up to $2,600 annually in 2026 and allow tax‑free, penalty‑free withdrawals.

Only 4% of 401(k) plans currently permit the $1,000 emergency withdrawal, according to a recent Vanguard analysis.

“Really haven’t taken off” because of the lengthy regulatory rollout and the time required for record‑keepers to implement the feature, said Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute.

In April 2025, T. Rowe Price announced that it had launched the first pension‑linked emergency savings accounts.

The workplace emergency savings accounts that are gaining traction are distinct from 401(k)s and other retirement savings vehicles, Copeland noted.

These include offerings from firms such as SecureSave and Sunny Day Fund, as well as initiatives by asset managers like Fidelity and BlackRock.

For employers, offering emergency savings can be a low‑cost benefit, especially when they merely facilitate payroll deductions, though some may choose to contribute additionally, Copeland said.

“When employers provide the benefit, they observe high participation rates and employees taking full advantage of it,” he remarked.

Legislation to address emergency savings gap

“The primary impact of Secure 2.0 has been to highlight this emergency‑savings gap,” Akabas explained.

He noted that over recent years there has been an “exponential increase” in employers offering emergency‑savings plans.

Akabas suggested that additional legislation could further advance these offerings.

Policymakers could boost emergency savings by extending automatic enrollment to all workplace accounts, Akabas said.

A bipartisan proposal, the Emergency Savings Enhancement Act, would raise the annual contribution limit for PLESAs to $5,000 and broaden eligibility to employees who satisfy retirement‑plan criteria, including highly compensated workers — defined in 2026 as those earning over $160,000 or owning more than 5% of a business, per IRS standards.

The bill was recently passed out of the Senate Committee on Health, Education, Labor and Pensions.

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