There’s a reason why many personal finance experts recommend having an emergency fund. Life happens, and unexpected expenses like car repairs, health emergencies or losing your job can pop up at any time.
An emergency fund can help you take care of said expensess without falling into debt or dipping into your retirement savings. According to Bankrate, 25% of Americans report that they would use a credit card to cover an emergency expense of $1,000 or more [1]. And while using a credit card might solve an immediate issue, paying off an expense with interest can put pressure on your budget for months to come.
Must Read
- Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don’t have to deal with tenants or fix freezers. Here’s how
- I’m 49 years old and have nothing saved for retirement — what should I do? Don’t panic. Here are 6 of the easiest ways you can catch up (and fast)
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and 3 simple steps to fix it ASAP
Bankrate adds that nearly one in four Americans has no emergency savings at all. Meanwhile, 37% of Americans say they couldn’t afford an emergency expense over $400, according to a recent survey from Empower [2].
Although many Americans struggle to save for emergencies, a recent survey from EBRI reports that seven in 10 American workers would likely use an employer-sponsored emergency savings account if they had the option [3]. This kind of employer-sponsored account is known as a Pension-Linked Emergency Savings Accounts (PLESA).
A PLESA can be a promising option for Americans struggling to save for emergencies, but is it the right option for you? Let’s take a look.
How a PLESA works
The creation of the PLESA was part of the implementation of the SECURE 2.0 Act of 2022. The legislation allows employers to sponsor an emergency savings account for employees, which automatically tucks a portion of an employee’s paycheck away for emergencies [4].
If your employer sets up a PLESA option, it can automatically enroll you in the savings plan. With automatic enrollment, your contribution will equal 3% or less of your paycheck, but you’ll have the option to manually adjust your contribution percentage if you choose to [5]. You can also opt out entirely.
These accounts have a maximum limit of $2,500, but some employers may choose to set a lower limit. For example, your employer might set a maximum limit of $1,000 for its workforce. Once you reach this threshold, the automated contributions to your PLESA will be paused [6].
You’ll have the ability to make withdrawals from the account each month, but the hope is that you’ll leave the funds untouched until you encounter a true financial emergency [7].
Read more: How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
Should you enroll in a PLESA?
PLESAs are relatively new, as employers were permitted to start automatically enrolling employees into these programs in December 2023.
With that in mind, not every employer has offered a PLESA to its employees. Currently, around one-third of American companies offer this emergency savings account, but 40% of employers want to get on board in the near future [8].
If you aren’t sure whether or not your employer offers this benefit, reach out to your human resources department, which should be able to let you know if a PLESA is an option. In many cases, PLESAs won’t be available just yet. But if you are interested in this savings account and your employer has yet to offer one, let your HR team know.
If you have the option to contribute to a PLESA, do yourself a favor and assess your finances before making a decision. For example, if you already have an emergency fund, then you likely don’t need the automated convenience of saving money in a PLESA.
The limit on PLESA contributions is also something to consider. While $2,500 is a decent amount of money, experts suggest saving three to six months’ worth of expenses in an emergency fund.
For many Americans, $2,500 doesn’t come close to covering three to six months’ worth of expenses. In this case, creating your own emergency fund in a high-interest savings account and redirecting the money that you’d put into a PLESA into your own fund might be the better option.
And if you aready have a robust emergency fund, redirecting the money you’d save in a PLESA to your long-term retirement accounts could also be beneficial.
What to read next
- Warren Buffett says you can’t buy time — but landlords are finding a way. Here’s how savvy real estate investors are avoiding 12 hours a month in tedious admin (for free)
- There’s still a 35% chance of a recession hitting the American economy this year — protect your retirement savings with these 5 essential money moves ASAP
- This tiny hot Costco item has skyrocketed 74% in price in under 2 years — but now the retail giant is restricting purchase. Here’s how to buy the coveted asset in bulk
- Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Join 200,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Article sources
At Moneywise, we consider it our responsibility to produce accurate and trustworthy content people can rely on to inform their financial decisions. We rely on vetted sources such as government data, financial records and expert interviews and highlight credible third-party reporting when appropriate.
We are committed to transparency and accountability, correcting errors openly and adhering to the best practices of the journalism industry. For more details, see our editorial ethics and guidelines.
[1]. Bankrate. “Bankrate’s 2025 Annual Emergency Savings Report”
[2]. Empower. “37% can’t afford an unexpected expense over $400: new Empower research”
[3]. EBRI. “35th Annual Retirement Confidence Survey Reports Worker Confidence Unchanged, While Retirees Feeling Better”
[4]. U.S. Department of Labor. “US Department of Labor issues guidance on new emergency savings accounts”
[5]. U.S. Department of Labor. “FAQs: Pension-Linked Emergency Savings Accounts”
[6]. Senator Young. “The Emergency Savings Act of 2022 – Myth vs. Fact”
[7]. IRS. “IRS provides initial guidance to employers setting up emergency savings accounts for their employees”
[8]. Commonwealth. “Employers can improve financial security by offering emergency savings”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.