Financial Wellness Shortfall Concerns Many Employers
Financial Wellness is a major concern for many employers. Retirement savings and financial wellness have surfaced as a struggle for many Americans. Two new surveys are out that show American workers are not where they want to be when it comes to retirement savings, and that employers are concerned about their employees’ finances.
A new study conducted by Harris Poll for TD Ameritrade and cited in USA Today found that the majority of Americans would give themselves a “C” grade or lower for their retirement savings. This can indicate a failure by or the absence of a strong financial wellness program. A third of those in their 40s and 50s feel like they are so behind on their retirement savings, they would give themselves a failing grade for their efforts. A little 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.
Moreover, insufficient retirement savings could be a concern for many Americans who may end up retiring sooner than planned. Half of those surveyed by Harris for TD Ameritrade said they retired earlier than they would have liked. In addition, many have hit stumbling blocks that have gotten in the way of their retirement savings. Nearly half of those in their 40s have withdrawn money from retirement savings accounts because of unexpected life events. And just one in three ages 50 to 79 make catch-up contributions to their 401(k) and/or individual retirement accounts (IRAs) indicating financial wellness programs are not doing-the-job.
Unfortunately, these retirement savings statistics likely do not come as a shock to employers. Mass Mutual has released its 2019 Workplace Financial Wellness Study, which found that eight in 10 employers believe their employees are struggling financially with issues such as retirement savings, paying off debt and managing medical costs. Some employers reported they heard employees talking about their retirement savings and financial struggles; retirement plan participation and employers’ knowledge of those who had second jobs also informed that statement, according to the Mass Mutual study, cited in HR Dive. And 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 say they want help from their employer to improve their financial health and planning, including retirement savings, according to a National Business Group on Health poll HR Dive cited.
As such, growing numbers of employers are offering financial wellness programs as an employee benefit to help workers better manage their day-to-day finances and improve their retirement savings. Around 53% of employers offer financial wellness, according to a Bank of America study, up from 24% four years ago. However, despite the prevalence of financial wellness programs, just 55% of employees consider their financial health and retirement savings good or excellent. That’s down from 61% last year.
In addition, financial stress and worries about retirement savings distract employees from their work, resulting in lost productivity and billions of costs to employers each year. According to a 2017 paper from 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 younger workforces are also offering student loan repayment benefits and matching contributions — a benefit approved by the IRS.
Financial wellness is a good first step toward improving workers’ financial literacy and retirement savings. However, employers must be mindful that financial wellness must go beyond mere education. The programs must engage employees through real-world applications and gamification to make it fun and inspiring. It’s important that employers offer an opportunity for employees to interact face-to-face with an expert, like a financial advisor, who can provide them with hands-on, personalized advice on managing their finances and retirement savings. By providing all of these components of an effective financial wellness program, employers may be able to help more workers to make the grade when it comes to retirement savings.