For too many of Vada Lindsey's lower-income clients, their hard-earned 401(k) accounts become go-to emergency funds when they are faced with unexpected cash needs.

Each year, Lindsey, a tax lawyer in Milwaukee, Wisconsin, who helps some of the city's poorest residents, sees people yanking money from already modest retirement accounts to deal with unexpected moves, job losses and other emergencies.

"We are not talking about people squandering the money, for the most part," says Lindsey, who also teaches law at Marquette University. "If you need food, then you're going to pull that out to take care of your family."

Her experience underscores recent industry data that shows Americans who earn less are more likely to tap their 401(k) plans early for cash. Furthermore, many workers are stepping away from workplace plans altogether, according to other recent data.

These trends, coming amid potential changes to Social Security, government budget pressures and the nation's growing wealth gap, are raising concerns about the potential increased risk of poverty facing Americans as they age and prompting calls for possible policy solutions aimed at low-earning workers.

"We need new plan types," said Karen Friedman, policy director of the Pension Rights Center, an advocacy organization.

401(K) WEAKNESSES

So-called defined-contribution plans like 401(k)s, which require workers to set aside and manage their own savings, have been criticized in recent years for favoring high earners and being inadequate for low earners. Even so, companies have largely switched to this model over traditional defined-benefit pension plans.

Proposals floated by private groups like the National Institute on Retirement Security (NIRS) and the National Academy of Social Insurance include expanding tax credits for low- and middle-income earners who contribute to such plans and putting a floor on Social Security benefits so that even those at the lowest benefit level could stay above the poverty line, currently $15,510 for a couple.

Senator Tom Harkin (D-Iowa), chairman of the Senate Committee on Health, Education, Labor and Pensions, has been pushing his own plan to create a national private pension plan.

The Obama administration has also proposed allowing workers to use their 401(k) money to buy annuities that would give them guaranteed monthly income for life once they retire. It has also regularly proposed having small businesses set up automatic individual retirement accounts for workers so money could be directly swept from their paychecks into personal accounts even if their employers don't have retirement plans.

So far, Congress has failed to bite on these ideas. Like many other proposals, they really don't address the issue facing Lindsay's clients - that low-income workers can't afford to save as much as experts say they will need for retirement.

Advocates like Diane Oakley, director of NIRS, concede that Congress isn't likely to craft a narrow approach bolstering benefits for low-income workers at the expense of programs helping upper-middle and high earners. But the issue could be addressed as part of larger efforts to rethink the U.S. tax code, reform pension systems and overhaul Social Security.

David John, a retirement and asset analyst at the conservative Heritage Foundation, says there is bipartisan concern about protecting the poorest retirees.

Washington analysts, however, are skeptical that such big-ticket and controversial projects will be tackled in a session already dominated by more immediate fiscal concerns on top of immigration and gun measures.

CASHING FUTURE CHECKS NOW

A report released last month showed those who earn less than $50,000 a year - slightly less than median income, according to Census Bureau figures - were more likely to turn to their 401(k)accounts for a loan or to cash out their plans before retiring.

Overall, 30 percent of households with less than $50,000 in annual income cash them out, compared with about 12 percent of those making $100,000 to $150,000 and nearly 8 percent for those making more than $150,000, according to the findings from Hello Wallet, a financial advisory firm.

Investment industry representatives dismissed the findings, saying they exaggerated 401(k) borrowing and that the plans are designed for hardship withdrawals if needed.

"These accounts were never intended to be impenetrable lockboxes," said the Investment Company Institute, which represents mutual fund and other investment companies, in an emailed statement.

Penalties - including a 10 percent early withdrawal fee and taxes - aim to deter pre-retirement withdrawals. But they offer little pause when folks urgently need cash, say financial experts who work with low-income families. Higher earners also tap into 401(k)s for loans, but they tend to do so for more strategic reasons such as buying a house.

Experts say the 401(k) "leaks" show most people lack basic emergency funds, especially as the U.S. economy continues to struggle.

"Stagnant wages and rising costs are making it tougher and tougher for people to save," Harkin said at a Senate hearing last week on retirement issues. The gap between what Americans should have for retirement and what they actually have saved is estimated to be as high as $6.6 trillion, he said.

One way to help spur more contributions is to upgrade the existing savers tax credit for low- and moderate-income taxpayers - turning it into a refundable credit that could be directly deposited into a retirement account, the way a 401(k) match would be.

That could boost balances for struggling savers, said Heritage's John, who also helps lead the retirement security project at the Brookings Institution, another think tank.

Another option would be for employers to set up 401(k)-like "platforms" that make it easier for workers to stash away funds for certain uses such as emergencies or a house, he said.

Social Security calculations could be adjusted to help those with long-term, low lifetime earnings qualify for the program, according to Melissa Favreault, an income and benefits expert at the Urban Institute, a progressive policy group.

That could be especially key as other data shows a growing number of Americans just aren't saving in employer-based plans, sacrificing long-term stability to focus on short-term needs.

A report last week by the Corporation for Enterprise Development (CFED), a nonprofit research and policy group aimed at lifting lower- and middle-class Americans, found the percentage of workers in employer-based retirement plans has dropped in about 25 states.

STATE INITIATIVES

Some U.S. states such as California and New York are also pushing separate saving programs to help people who make less save more. Last year, California launched a controversial state-run retirement savings plan for workers in the private sector, the first such program in the country. A New York City program, SaveUSA, also allows those with lower incomes to open special savings accounts when they file their taxes.

Plans like Harkin's that lock up the money until retirement could offer a better model for young people and others now most likely to "breach" their 401(k) under the current system, said Pension Rights Center's Friedman.

"It's the middle-income, lower earners that are probably going to pull out that money, and those are the people who are going to need the money most. So, it's a system that kind of works against itself," she said.

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