Earlier this month we learned that although general retirement confidence by several measures has improved a lot in recent years, many Americans are still worried about old-age financial security. A lack of savings is one of the biggest factors underlying such concerns, and for a large number of people debt is the main obstacle preventing them from regularly setting more money aside. For example, new data from the Federal Reserve Bank of New York showed that total household indebtedness in America climbed to a record high in Q1, and an Alight Solutions study similarly found that more than three-quarters of surveyed U.S. workers carry at least some level of non-mortgage debt, with an average liability of $28,042.
Nearly all surveyed employees (93 percent), though, at least acknowledged that it is important to be debt-free, and 60 percent said they believe they can properly manage their debt load on their own. Such optimism is encouraging and likely a reflection of the continued economic expansion in America and uptick in wage growth. However, even with improving conditions there is still a risk that many people are perhaps a bit overconfident in their ability to manage their finances. Sixty-nine percent of respondents, for instance, described themselves as being “financially savvy,” and 23 percent said they believe they annually max out their tax-advantaged 401(k) savings, but only 6 percent of Americans actually contribute as much as possible to their 401(k) plan each year, according to Alight.
Fifty-five percent of surveyed workers also admitted that they feel overwhelmed by the number of different ways they can invest their savings, and 43 percent reported that they are often intimidated by financial matters. One thing that may be able to help is outside financial guidance, especially when provided by an employer. Indeed, surveyed workers at firms offering some form of financial advice as a benefit were found to have a higher likelihood of saying that they “know the steps needed to ensure a comfortable retirement” and “feel in control of their financial future.” Participants in financial well-being programs were also more likely to be currently contributing to an employer-provided retirement savings plan and routinely setting aside money for unexpected healthcare expenses.
Further, respondents utilizing wellness benefits were more likely to have estimated how much money will be needed in old age, created a plan for achieving long-term financial goals, and projected a timetable for withdrawing savings in retirement. Firms looking to attract and retain talent should also take note that 88 percent of surveyed workers said they believe employers should help with retirement saving, and nearly half would like some sort of assistance with debt management, saving for short-term needs, and establishing an emergency fund. A majority of worker respondents also said that helpful services or tools an employer can provide are access to a personal advisor, online tools for investing and retirement planning, and web-based tools that assist with general finances, debt management, and budgeting.
Sources: Alight Solutions
Post author: Charles Couch