Ever hear of a ‘side-car’ savings account? That’s the term retirement researchers are beginning to use to describe a possible emerging innovation: Having your employer-sponsored retirement plan be a place where you can store up ‘rainy day’ emergency reserves.
As background, researchers are seeing that cash flow ‘shocks’ in retirement can derail daily cash flow, and therefore financial well-being. Oddly, the financial ‘shocks’ that retirees typically describe are for such ordinary expenses as needing cash for new car tires, a dental bill, or a broken furnace. However, whether retired or not, the arrival of an abrupt need for cash is hard when you don’t have cash reserves, and many American do not have any cash reserves.
‘Side-car’ savings accounts emerged again as a recurring policy idea in a recent retirement policy research conference, EBRI’s 82nd Policy Forum in Washington, D.D. on December 14, 2017.
Check out the high level summary of the proceedings here.