Last week we looked at a few of the reasons why employers in America are concerned about older workers delaying retirement. A new study by Prudential expanded on this issue and estimated that just a 1-year increase in the average retirement age could result in additional annual labor costs of about 1.0 percent to 1.5 percent for a company’s entire workforce. To help avoid these potential outlays, the report’s authors recommended that employers should adopt retirement programs with features like automatic enrollment, matching contributions, lifetime income options, and QDIAs.
The authors also argued that employers could help make sure workers retire on time by providing education to assist employees in making informed and proactive financial decisions. Such programs have become quite popular in recent years. In fact, a new Fidelity Investments survey found that 84 percent of large-and mid-sized firms now have some sort of financial security program in place for their workers. That is up markedly from 76 percent in the previous year’s survey and the third most-popular wellness offering behind physical well-being programs (95%) and emotional health programs (87%).
One of the main objectives of a financial wellness program is to teach workers how to take better advantage of the employer-provided retirement benefits made available to them. There is a great need for that kind of education, as evidenced by a study from Guardian Life which found that even though 80 percent of surveyed U.S. workers said that they believe they understand their benefits offerings “very well,” less than half (49 percent) could correctly answer at least eight out of ten True or False questions about their current benefits.
Similarly, a PlanVision study found that 96 percent of surveyed working Americans said that they want personal guidance during the 401(k) enrollment process, and 88 percent would prefer that this occurs in the form of one-on-one assistance. That is not too surprising since one in ten worker respondents admitted to having “no understanding” of investments at all, and another 34 percent said that they have only a “limited understanding.” Even for the one in three workers who said that they understand investing “reasonably well,” a majority said that they would still like some additional guidance from their employer.
Beyond investment and benefits education, financial wellness programs also aim to boost general financial literacy and teach employees ways to better manage their personal finances, skills that are badly needed by many Americans. Just look at a survey by the National Foundation for Credit Counseling which found that only two in five U.S. adults said that they currently have a budget and regularly keep close track of their spending. Further, just 56 percent of respondents gave themselves a grade of “A” or “B” on their knowledge of personal finance, and three in four surveyed adults agreed that they could benefit from advice and answers to everyday financial questions.
Altogether it should seem clear why more and more employers are launching financial wellness initiatives. However, such programs can take a while to be successful, according to a new report from the International Foundation of Employee Benefit Plans. Specifically, 24 percent of surveyed employers who said that their financial wellness efforts were a success had their programs in place for 6 to 10 years, and 49 percent started their wellness initiatives more than a decade ago. Further, employers with successful programs were typically found to customize their wellness efforts based on workers’ ages, income levels, and life stages, and access to financial planners or other personal consultation services were often made available to employees as well.
Sources: Prudential, NAPA, Fidelity Investments, Guardian Life, PlanVision, NFCC, IFEBPPost author: Charles Couch