I caught the ‘UPS Offers a Rainy-Day Saving Plan’ article in the October 23rd Wall Street Journal. I’ll give the Readers Digest version here. BlackRock Inc. is working with UPS, among a handful of other large businesses, on allowing UPS employees to attach an emergency savings fun to his or her 401k. The employee would then be able to withdraw funds tax free from the emergency account. This is designed to offset the increasing number of U.S. employees withdrawing funds from their 401k, paying the 10% penalty on top of applicable taxes. The article also notes that Prudential Retirement also has a similar program for more than 20 companies.
Conceptually, I love this idea. According to a GOBanking Rates study from December 2019, 70% of Americans have less than $1,000 in their savings. 45% of Americans have no savings. This really resonates with me. I grew up in a middle-class family in a rural Midwestern town. Savings wasn’t that much of a priority. I didn’t make it one in my 20s either. I spent and spent, racking up tons of credit card debt. Not until I approached my 30s did I decide to get out of debt and build up some sort of savings. And I’m not going to preach because my problem was financial ignorance. A good number of Americans are barely making a living wage. It’s not a matter of want-to, for lack of a better term. It’s a matter of they can’t simply afford it.
Back to this program though. I love the idea because of the convenience. The emergency fund comes straight from the employee’s paycheck and is attached to his or her 401k plan. In some cases, the employee’s 401k plan is already setup. There’s limited paperwork on the employee’s side, other than designating the amount to fund. In a time like now, employees may need an emergency fund more than ever.
I understand that setting up paperwork for direct deposit into a bank account isn’t that time consuming. No, it’s not. For some, it’s more time than they want to put in. I probably fell into that category. For others though, they may not have a savings account, or even a bank account. With this program, employees don’t have to. Attach the emergency fund to the 401k and take it when you need it. Strategically, I’m not sure about the profitability of these programs. But I give this program high marks on the corporate responsibility front. It shows how some companies truly look out for their employees.
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