Employees who used their financial wellness program on a regular basis improved in all areas of financial planning, with the greatest level of improvement in retirement preparedness, according to a new, multi-year study.
Financial Finesse’s 2018 Financial Wellness Year in Review highlighting the current state of financial wellness in the U.S. shows that in 2013, only 21% of participants in the study indicated they were prepared for retirement, but by 2018, that number rose significantly, to 57%.
This year’s report includes the results from 2,458 employees who regularly engaged with their employer’s personal financial wellness program from 2013 to 2018 to determine how they progressed financially. Greg Ward, Director of the Financial Wellness Think Tank and co-author of the report, contends that the research is the most significant the firm has conducted because it studies the effect of engagement in a financial wellness program for the same group of employees over the five-year period.
For purposes of comparison, the study also looked at the financial health of employees who completed an initial financial wellness assessment in 2015, along with those who completed an assessment in 2017, to see how length of engagement affected changes in retirement preparedness. According to the findings, all groups showed improvement in retirement preparedness, but the level of improvement increased the longer an employee remained engaged in the benefit, the report emphasizes.
Other key improvements included:
- a 50% increase in average retirement plan contribution rates, from 6.3% to 9.4%;
- a 41% increase in average contributions to an HSA, from $934 to $1,319; and
- a 26-point improvement in the percentage of employees who felt confident in their investment strategy, from 43% to 69%.
“The study’s findings have significant implications for what some industry experts have called a retirement crisis,” notes Liz Davidson, Financial Finesse’s founder and CEO. Davidson explains that employers have spent large sums of money trying to address this problem, through incentivizing employees to save by matching their retirement plan contributions, automatically enrolling employees in their retirement plans and providing employees TDFs and other professionally managed accounts.
“Each innovation has been heralded as the solution to the problem, and while they have absolutely had an impact, getting millions of working Americans to save enough to retire comfortably has turned out to be much more complex than originally expected,” she observes.
To support its findings, Financial Finesse points to the 2019 EBRI/Greenwald Retirement Confidence Survey showing that 70% of American workers say debt is having a negative impact on their ability to save for retirement. Moreover, 55% of workers say they are unable to save for retirement and save for other financial goals at the same time.
“Even the best retirement plans can’t compensate for an employee who simply is unable to save sufficiently due to high levels of student loan debt, rising health care expenses, and a society that places a premium on ‘living your best life’ with experiences that are largely out of reach for most Americans,” adds Ward. “The reality is that most employees need financial coaching to overcome these obstacles,” he says.
The full report is scheduled to be released May 22. A summary of the forthcoming report is available here.