1 in 3 employees is tapping their retirement savings

Right now, financial wellness feels a bit out of reach for many Americans. An unpredictable economy and rising living costs are forcing many to revisit their long-term savings plans, and more than one-third of employees are leaning on their retirement funds sooner than they had hoped.

According to Payroll Integrations' 2025 Employee Financial Wellness Report, 38% of employees say they've tapped their retirement funds — and a third (33%) plan to do so within the next year. This raises broader concerns about financial stress — especially across younger generations with nearly half (46%) of Gen Z workers reporting they've already taken out funds.

While this is a clear challenge for employees, it can also be a cause for concern for the organizations they work for — leading to lower retention, reduced engagement and overall impact to morale. Addressing these issues requires more than simply offering a retirement plan; it calls for a holistic approach to benefits.

Employees recognize the importance of long-term saving, with 87% currently contributing to their workplace retirement plan. Problems arise, however, when they run into emergencies or need to pay off debt, and have no other resources but their retirement to rely on. They need the guidance and tools to maintain their financial wellness before the stress of dipping into retirement and other long-term savings becomes a recurring cycle.

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Here are four ways employers can build a holistic financial wellness program to better support their workers:

1. Help employees maximize existing benefits: Most employees are presented with a long list of benefits when they first join a company. They're typically eager to enroll in priority benefits like insurance and retirement, while other offerings may fall to the wayside. Before adding new benefits, employers should ensure employees are fully taking advantage of what's already available.  

Workers may overlook existing offerings that could put a little extra money in their pockets, like pre-tax commuter benefits, wellness stipends, WFH reimbursements or technology allowances. Companies should proactively share information about these benefits at least quarterly, and remind employees of any reimbursement deadlines. These benefits can add up quickly, giving employees the opportunity to build emergency savings or pay down debt–reducing the need to tap retirement accounts. 

Once employers have assessed how well existing benefits are being used, they can identify gaps and determine what additional offerings they can add. This process can also highlight benefits employees aren't interested in, so companies can redistribute resources to programs that better align with employees' needs.

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2. Introduce emergency savings accounts: Most employees aren't dipping into their retirement early because they want to support a big purchase, or are continuously overspending. According to the 2025 Employee Financial Wellness Report, 37% of these early retirement withdrawals are for financial emergencies, like a home or car repair. For millennial, Gen X and boomer workers, this is the top reason they're withdrawing from their retirement accounts.

As part of SECURE 2.0, employers can offer workers pension-linked emergency savings accounts (PLSEAs), allowing non-highly compensated employees to contribute up to $2,500 a year on a Roth basis. These funds can be withdrawn tax- and penalty-free for emergencies, offering employees a way to address unexpected costs while keeping their long-term savings strategies intact.

Employers can also offer student loan matching programs under Secure 2.0, contributing to employees' student loan payments in a way similar to a 401(k) match. This is especially impactful for Gen Z workers, nearly half (42%) of whom have tapped their retirement funds to pay off debt.

3. Make financial advice more accessible: Employees often don't know what they don't know. Even with a full range of benefits, companies can only do so much if employees lack a financial strategy or larger goals.
Employers can help by offering access to financial planners and offering educational sessions where employees learn practical tips for maximizing their savings. Virtual budgeting tools can also help employees create personalized financial wellness plans. By offering these resources, companies can equip employees with the skills and knowledge to build stronger financial habits and avoid defaulting to early retirement fund withdrawals during hardships. 

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4. Keep conversations open: As economic conditions evolve, so do employees' financial priorities. With open lines of communication, companies can ensure they're offering benefits that truly support their teams. Regular communication also helps to address emerging needs in real-time, before small issues turn into bigger problems.

It can be challenging for HR teams and company leaders to connect 1:1 with employees or schedule group sessions while juggling hours of administrative work to manage benefits. To prioritize employees, HR teams have to streamline low-impact, routine tasks and leverage technology where possible. By spending less time on administrative work, companies can bring their focus back to supporting employees. 

Many employees are navigating financial challenges — but employers can step in with proactive support to guide them before these issues impact their long-term financial wellness.