While the vast majority of households with retirement savings haven’t accessed their qualified retirement savings accounts yet, “our study reveals households with larger emergency savings funds are less likely to tap into their retirement savings than those with less emergency savings,” Drinkwater added.
The more emergency savings a household has, the less likely they are to raid their retirement accounts. Households with enough emergency to cover more than a year of expenses are very unlikely to tap or have tapped their retirement savings —regardless of household wealth, SRI reported.
Retirement account leakage is a significant issue even in the best of times. Americans age 25 to 55 withdraw an estimated $69 billion from qualified retirement savings accounts each year, the General Accounting Office (GAO) reports.
Advisors and plan providers who want to reduce the incidence of plan leakage should encourage employers to offer basic savings accounts along with their defined contribution plans, in addition to promoting additional savings for emergencies, “even though such accounts may divert some plan contributions,” SRI said.