Vanguard’s newest approach to emergency savings

Many people are one flat tire away from disaster, and wondering how to save for an emergency can be a huge source of stress. Emergency savings provide a necessary safety net in times of need, but not everyone is saving properly for a possible spending shock. Our How America Saves 2024 study showed that loan use increased by 12% in 2023 compared with 2022, and that 3.6% of participants initiated hardship withdrawals (up from 2.8%). These types of money moves can hurt participants' long-term outlooks and overall financial health.

The SECURE 2.0 Act authorized pension-linked emergency savings accounts (PLESAs) within retirement plans, but those accounts come with deposit limits and other restrictions (highly compensated employees making $150,000 or more are ineligible). We researched multiple solutions to find one that helps our plan sponsors provide a well-rounded and competitive financial well-being offer, and landed on one that truly embodies our mission of helping all investors. Vanguard has chosen to offer our Cash Plus Account to participants, equipping them with an out-of-plan emergency savings strategy to empower the way they save.

We share your goal of helping all your participants achieve financial well-being and long-term success. Our principles have guided our proposal to move forward with an out-of-plan solution that allows all participants—regardless of compensation—to save for emergencies beyond the PLESA limit of $2,500. We researched and vetted several out-of-plan options and ultimately determined that our own Cash Plus Account can help drive participant outcomes by providing a mix of benefits that align with our mission.

Cash Plus will not only give participants a home for their emergency savings, but also a space to save for upcoming expenses or short-term goals (like a wedding or a down payment on a house). Their cash will be there when they need it while earning a competitive APY on Cash Plus program balances.****

Not all plans are eligible for Cash Plus. If you want to know more or find out how to become eligible, please contact your Vanguard representative. 

Sources

¹ Bankrate's 2023 annual emergency savings survey.

² Pew Charitable Trusts. How Do Families Cope With Financial Shocks. October 2015.

Notes

*Some third-party institutions may not accept the Cash Plus Account routing number for transactions. If you have any issues using the routing number on a third-party website, contact the provider.

**An annual account service fee, wire redemption fees, and account closure and full transfer-out fees may apply. See the Vanguard Brokerage Services commission and fee schedules for details and exclusions that may apply.

***Cash Plus Bank Sweep program balances are held at one or more participating banks, earn a variable rate of interest, and are not covered by SIPC. See the list of participating Program Banks. Balances are eligible for FDIC insurance, subject to applicable limits.

****The Cash Plus bank sweep program APY will vary and may change at any time.

The Vanguard Cash Plus Account is a brokerage account offered by Vanguard Brokerage Services, a division of Vanguard Marketing Corporation, member FINRA and SIPC. Under the Sweep Program, Eligible Balances swept to Program Banks are not securities: They are not covered by SIPC but are eligible for FDIC insurance, subject to applicable limits. Money market funds held in the account are not guaranteed or insured by the FDIC but are securities eligible for SIPC coverage. See the Vanguard Bank Sweep Products Terms of Use and Program Bank list for more information.

All investing is subject to risk, including the possible loss of the money you invest.

You could lose money by investing in a money market fund. Although the fund seeks to preserve the value of your investment at $1 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund's sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.

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