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Emergency Savings Needed for Financial Wellness

Emergency Savings is now a headline component of Financial Wellness.  In recent months, Emergency Savings has come to the forefront for the American workers.  Emergency Savings is now a major concern for many employers as well.  There is now a new perspective on financial well-being and the meaning of retirement security.  Retirement Industry professionals now struggle with whether or not to encourage workers to save to build an emergency savings fund since doing so can compete with the goal of growing retirement savings.

Two surveys have been published and reflect that American workers are not where they want to be when it comes to retirement savings.  More than ever before, employers are concerned about their employees’ finances.

A study conducted by Harris Poll for TD Ameritrade and cited in USA Today found that most Americans would give themselves a “C” grade or lower for their retirement savings.  This indicates a failure by, or an absence of a strong financial wellness program.  A third of those in their 40s and 50s feel like they are so far behind on their retirement savings, they would give themselves a failing grade.  More than half (53%) of those surveyed have less than $100,000 in retirement savings. Only 12% of 60 to 79-year-olds surveyed have retirement savings of at least $1 million. The retirement savings survey included 2,000 adults ages 40 to 79.

Unfortunately, retirement savings statistics do not come as a shock to employers.  When Mass Mutual released the 2019 Workplace Financial Wellness Study, it reflected that 8 in 10 employers believe employees are struggling financially.  Issues such as retirement savings, paying off debt and managing medical costs are taking more time.  Employers are aware that some employees had second jobs according to the Mass Mutual study, cited in HR Dive.  More than half (57%) of plan sponsors said they believe employees look to employers for assistance with their finances, including advice on how to increase their retirement savings. Indeed, about a third of employees says they want help from their employer, including with retirement savings, according to National Business Group on Health poll HR Dive cited.

Financial stress and worries about retirement savings can distract employees during working hours, resulting in lost productivity.  This can cost employers billions of dollars each year. According to the Center for Financial Services Innovation, one in three workers reports that a personal money problem, including concerns about not having adequate retirement savings, distracts them from their work and causes health problems.  More companies with a younger workforce are also offering student loan repayment benefits and matching contributions – a benefit approved by the IRS.

Financial wellness in the form of a solid Emergency Savings plan is a great first step toward improving workers’ financial literacy and retirement savings. Employers now seem to be aware that financial wellness must go well beyond mere education.  The programs must engage employees through real-world applications and include emergency savings.  By providing these components, employers help more workers to generate improved outcomes when it comes to retirement savings.

Would you like to learn more about Emergency Savings?  You can join a one-hour Virtual Town Hall Meeting at 1:00 PM EST on Friday, May 22, 2020.  The upcoming TSPU Virtual Town Hall speakers include:

  • Warren Cormier, Executive Director, DCIIA Retirement Research Center (moderator).
  • Tim Flacke, Executive Director, Commonwealth.
  • Jamie Greenleaf, General Partner/Principal, Cafaro Greenleaf.
  • David John, Senior Strategic Policy Advisor, AARP.
  • Christine Lange, Head of Retirement Business Management & Customer Solutions, Prudential Financial.

Click Here to register for the Emergency Savings Town Hall Meeting at 1:00PM EST on Friday, May 22, 2020.

Topics to be covered include:

  • Emergency savings as a “sidecar” feature to a DC plan.
  • An expanded view of workplace retirement programs.
  • New perspectives on financial well-being and retirement security.
  • What industry providers and associations are working on to offer solutions.
Steff Chalk

Steff Chalk

Managing Editor at 401kTV
Steff C. Chalk is Executive Director of The Retirement Advisor University, a collaboration with UCLA Anderson School of Management Executive Education. Steff also serves as Executive Director of The Plan Sponsor University and is current faculty of The Retirement Adviser University.
Steff Chalk
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