SPRINGFIELD, Mass., Jan. 23, 2020 – As many American workers struggle to cover emergency expenses, Massachusetts Mutual Life Insurance Company (MassMutual) is offering an emergency savings solution to every worker who participates in one of the insurer’s 401(k)s or other defined contribution plans.
The emergency savings solution is being made available to 2.6 million plus retirement plan savers for which MassMutual is their plan’s administrator or recordkeeper. These funds are administered by Millennium Trust Company, LLC, which is a leading provider of specialized retirement services for institutions, small businesses and individuals, and MassMutual’s provider for automatic IRA rollovers. Millennium Trust created this emergency savings fund product to give retirement providers a way to offer plan participants access to an easy and automatic way to save for unexpected expenses.
“MassMutual’s research shows that three out of four American workers lack enough savings to cover at least six months of expenses in case of an emergency. One in four workers has less than a months’ savings or no savings1,” said Paul Lapiana, Head of Product for MassMutual. “The lack of emergency savings often prevents people from saving enough for retirement.”
To combat that problem, MassMutual is making the emergency savings solution available automatically through MassMutual’s MapMyFinances financial wellness tool, which helps workers prioritize their personal finances and employee benefits based on their family needs and budget. Emergency savings is a common priority given many people’s lack of savings, according to Lapiana.
The accounts require a minimum deposit of $25 per month, are FDIC-insured, taxable and through Millennium Trust’s cash account sweep program earn a competitive market rate of return. The maximum amount workers can accumulate in their emergency account is $250,000.
“Americans need to save for retirement, but also for unexpected expenses that could potentially derail their retirement strategy,” said Erik Beck, Chief Growth Officer at Millennium Trust. “That’s why we created this platform—to provide individuals with an easy and automatic way to save for emergencies. This will help protect Americans’ retirement nest egg should emergencies arise, and will help them achieve greater financial wellness. ”
By helping workers better manage financial emergencies and other short-term financial needs, MassMutual aims to enable them to achieve greater financial security. Once workers have their shorter-term financial needs under control, Lapiana said, they are better able to focus on longer-term financial goals such as retirement.
“If you are worried about how to pay a hospital emergency room bill, an unexpected car repair or other sudden financial need, it’s hard to picture living securely in retirement,” Lapiana said. “Relieving workers of their short-term financial worries over time enables them to focus and ultimately realize their longer-term financial goals.”
Employers are also recognizing the need to address workers’ financial wellness issues, according to Lapiana. Financial stress can sometimes intrude upon the workday and productivity, he said.
The 2019 MassMutual Workplace Financial Wellness Study2 finds that 79% of employers say their workers are struggling financially. Although employer estimates vary about how many employees are plagued with financial problems, half of employers (51%) estimate that at least 25% or more of their workers struggle financially and 15% of employers say at least half of their workers are plagued by financial woes, the study finds. Proof points for employees’ financial struggles include managers’ conversations with employees, employees’ lack of participation in retirement plans, working second jobs, taking loans from retirement plans, asking for paycheck advances and other indicators.
The most prevalent employee financial problems cited by employers include credit card or other consumer debt, day-to-day expenses for housing and childcare, the inability to save and prepare for retirement, a lack of emergency savings, and high medical costs, according to the study.
Money worries accompany many Americans to work. Four in 10 (40 percent) middle-income workers – those with household incomes of between $35,000 and $150,000 – say they worry about money at least once a week while at work, according to the 2017 MassMutual Middle America Financial Security Study3. Half (51 percent) of Americans who are less affluent – those earning less than $45,000 – reported bringing their financial concerns to work at least once a week and 20 percent said daily.
“The availability of emergency savings through the workplace is one more way employers and their employees are working together to address the problem of financial wellness,” Lapiana said. “It’s also one more way that MassMutual is working to accomplish its goal of helping all Americans achieve financial security.”