Earlier this month we mentioned that many employers in America are concerned about older workers delaying retirement. A study by Prudential expanded on this issue and even estimated that just a 1-year increase in the average retirement age of a business’s employees could result in additional annual labor costs of about 1.0 percent to 1.5 percent for the company’s entire workforce. To prevent these potential outlays the report’s authors recommended that employers set up retirement programs with features like automatic enrollment, auto-escalation, and matching contributions.
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 Fidelity Investments analysis found that more than eight in ten large-and mid-sized firms already had some sort of financial wellness program in place for their workers prior to the pandemic, and a new Employee Benefit Research Institute (EBRI) survey suggests that the proportion of employers that are actively implementing such programs has actually increased in 2020. 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 available to them.
There is clearly a need for this kind of education because a report from Guardian Life found that even though 80 percent of surveyed U.S. workers said that they believe they understand their benefits offerings “very well,” not even half 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 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 the NFCC poll which found that only two in five U.S. adults reported currently having a budget and regularly keeping 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 agreed they could benefit from advice and answers to everyday financial questions.
Sources: Prudential, Fidelity Investments, Guardian Life, PlanVision, NFCC