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U.S. Savings Rate Looking Good for Now

401k Retirement CommitteeU. S. Savings Rate looks good as a snapshot-in-time.  But, the question becomes, is the U.S. Savings Rate telling the entire story?  Are we looking at the statistic in a vacuum?  Financial wellness and retirement savings are each good measures of how people are planning for their future.  With the advent of the 2020 pandemic the American Workers and Retirement Plan Participants are re-assessing their long-term and short-term savings habits.  As reported recently by CNBC, “the personal savings rate hit a historic 33% in April, the U.S. Bureau of Economic Analysis said Friday.  This rate – how much people save as a percentage of their disposable income – is by far the highest since the department started tracking it during the 1960s.  April’s mark is up from 12.7% in March.”

When viewing the myriad of “cash” related savings plans, the terms Financial Wellness, immediate cash, liquid cash, emergency cash, and three or six-months of living expenses come to mind.  At the end of 2019 many companies had either started or begun to analyze Financial Wellness Programs as a strategy for helping employees take hold of their own financial future.  Everyone was aware that being financially secure with some cash-on-hand was a good idea.  However many Chief Investment Officers and Corporate Treasurers were questioning the validity of spending time and money on the concept of having a financially-well workforce.  Time and money are precious resources for the corporate world – and at no time can either be squandered.

At the start of 2020 and into the second quarter of the year, companies learned the benefit of maintaining a strong cash position.  Cash-on-hand not only works for the corporation but it also helps for individuals to have a cash-cushion.  That cushion can be devoted to nothing other than helping the household through the unknown and unforeseen emergency.

Financial wellness and retirement planning can reduce workers’ stress, enhance productivity, and provide advancement opportunities for younger employees, according to a recent article in BenefitsPro.  Stress not only undermines employers’ financial wellness efforts; it also impacts the bottom line.  Financial stresses have resulted in a 34% increase in absenteeism and tardiness, according to the Society for Human Resource Management (SHRM).  And financially stressed employees miss almost twice as many days (3.5) per year compared to their unstressed peers, as one study from the Center for Retirement Research at Boston College uncovered.

Today the employer is well served to see that their employees have more than a passing awareness around the concepts of saving for that rainy-day expenditure.  Financial stress distracts employees from getting their work done.  Thirty-four percent of Generation X, 16% of Baby Boomers, and 37% of Millennial-workers say their finances derail their productivity, according to a PricewaterhouseCoopers Employee Wellness Survey.  PwC also found that nearly half of employees get distracted by their financial stress more than three hours per week.  An increasing U.S Savings Rate is a fantastic starting-point.  Employers can ill-afford to take their eye off the ultimate prize.  The U.S. Savings Rate, the employee’s emergency fund, Financial Wellness, and retirement readiness all work in tandem to establish a work environment that can sustain with stress-reduced workers.

To register for a Webinar on The Future of Financial Wellness, CLICK HERE.  The Webinar is scheduled for Friday June 26, 2020 at 1:00PM EST.

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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