[ROBYN KURDEK]
PLAN OPTIMIZATION/FINANCIAL WELLNESS
U.S. employees are stressed about their finances. It’s no wonder — a 2016 NerdWallet study found that the average American household carries a $16,748 credit card balance, $49,905 in student loans, and $134,643 in all types of debt combined. That means sleepless nights, missed workdays, and lost productivity.
It also means employees are missing the mark when it comes to saving for retirement. In response, many employers have implemented financial wellness programs. These programs are designed to help workers improve on personal finance basics like managing their money day-to-day, reaching key goals, and protecting against risk.
Particularly for defined contribution (DC) plan sponsors, the hope is that these programs also will move the needle on retirement readiness. There’s a lot of excitement around financial wellness, and rightly so, but measuring its return on investment can be tricky.
Nonetheless, employees clearly need help, and many are turning to their employers for guidance on getting their finances on track. According to recent research from Prudential on “The State of Financial Wellness in America”, a majority of employees who self-assessed their financial situation — 57% — are very or somewhat stressed about their financial situation. The three biggest stressors were saving for the future (67%), paying monthly bills (57%), and credit card debt (42%).
Prudential’s findings on retirement readiness were even more telling. Nearly half of employees (46%) said they aren’t confident their retirement savings are sufficient, and 39% said they felt very or somewhat unprepared to fund retirement. What’s more, 19% of those who have access to a DC plan don’t contribute at all, and 16% responded that saving for the future meant meeting needs that may arise within a few months.
Clearly, financial wellness programs are necessary to help employees become more penny wise and less pound foolish. Sponsors can implement more effective programs by gaining an understanding of their employees’ unique financial needs. First, have your workforce take a financial self-assessment. Then, analyze the results to determine how to structure your financial wellness program to best meet their specific needs. For example, if most employees are concerned about paying off debt, focusing on helping them achieve that goal will more likely lead to better outcomes.
Additionally, It’s important to give employees the tools they need to succeed. Applications and access to online coaching, for example, may help keep them accountable for reaching their goals. You should also give your program periodic check-ups to make sure your employees’ overall financial well being is, indeed, showing improvement, and make adjustments as needed. After all, having healthy finances and seeing measurable progress towards their goals means happier, more productive employees, and that’s a good prognosis for everyone.
