08.01.2025 By Krystel Spell

New Ways to Save for Emergencies Through Your Workplace Retirement Plan

For many Americans, saving for emergencies can feel like a struggle. A surprise car repair, medical bill, or even a last-minute move can throw off your entire budget, and most Americans don’t have $1,000 set aside to deal with it.

For many Americans, saving for emergencies can feel like a struggle. A surprise car repair, medical bill, or even a last-minute move can throw off your entire budget, and most Americans don’t have $1,000 set aside to deal with it.

That’s why a federal law called the SECURE 2.0 Act created two tools to help make saving easier. These tools are built into some employers’ retirement plans, like a 401(k), and can help you build an emergency fund while you work.

Tool #1: Emergency Savings Account Linked to Your 401(k)

This is what’s known as a sidecar account or PLESA (short for Pension-Linked Emergency Savings Account). It’s a new kind of savings account connected to your retirement plan.

Here’s what you need to know:

  • It’s an after-tax account, separate from your retirement savings
  • You can contribute up to $2,500 per year
  • Withdrawals are allowed at least once per month with no penalties
  • The first four withdrawals per year must be fee-free
  • Your money is held in capital-preserving investments like stable value funds
  • Only non-highly compensated employees based on your salary are eligible
  • Not every employer offers this yet, so you’ll need to ask your HR or benefits team

Why it matters:This offers a way to save for short-term needs without dipping into your retirement or relying on high-interest debt like credit cards.

Tool #2: $1,000 Emergency Withdrawal From Your 401(k)

The SECURE 2.0 law also allows some employees to withdraw up to $1,000 from their 401(k) for emergencies without paying the usual 10% early withdrawal penalty.

Here’s how it works:

  • You can self-certify the emergency with no extra paperwork required
  • You’ll still pay regular income tax on the withdrawal
  • You have three years to repay the amount
  • If you don’t repay, you’ll need to wait three calendar years before taking another emergency withdrawal unless the funds are replenished

This option is helpful when you need access to cash quickly in a true emergency, but it’s important to understand the rules and long-term impact.

How Do You Use These Tools?

  • Start by talking to your HR or plan administrator. These tools are optional for employers, and not all workplaces offer them yet, but asking can open the door.
  • Enroll and set up small, automatic contributions (as little as $10 a week)
  • Pair this with a regular savings account, so you have multiple layers of support
  • Learn how withdrawals work ahead of time so you're not caught off guard when you need help later

Why Ask HR?

Many workplace savings benefits are opt-in, meaning they require you to actively enroll. Not all employers offer these tools yet, and even when they do, they’re not always automatically provided. Talking to your HR or benefits team is the best first step to understand what’s available to you and how to access it.

A Note on Using These Tools Wisely

These tools are designed to support you during difficult times, not to replace your emergency fund or long-term savings goals. If you’re just getting started, they can be a helpful bridge while you work toward building savings elsewhere.

While having access to a $1,000 withdrawal or a linked savings account through work may bring peace of mind, it’s best to view these as a backup, not a go-to.

When possible, we encourage you to build a separate emergency fund through a traditional bank, credit union, or high-yield savings account.

And if you ever need to use one of these workplace tools, that’s okay—just try to make a plan to rebuild what you used so you're financially prepared the next time life throws something unexpected your way.

Why This Matters for Everyday Families

These updates were made to help people save, especially those living paycheck to paycheck. Not everyone can set aside a lot, but having even a little saved gives you breathing room when life happens.Having just $500 in savings can mean the difference between financial peace and financial panic.

You’re Not Alone

At America Saves, we believe that anyone can build savings, no matter your income or life stage. These workplace tools are just one more way to help make that goal a little more achievable.

Want a little extra motivation?
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