Those who seem best prepared for retirement also seem to have their short-term finances under control, according to a new report.
The report by Financial Finesse notes that a significant difference between those who are on track for retirement and those who aren’t is how they handle cash flow and debt. Employees who report being on track are:
- 39% more likely to say they have a handle on cash flow;
- 93% more likely to have an emergency fund;
- 59% more likely to be comfortable with debt; and
- 68% more likely to pay off credit card balances in full.
Not surprisingly, the report notes that part of the problem may be the conflict between the need to save for retirement and the challenge of meeting current financial obligations.
Financial Finesse also notes that:
- 76% of those who are not on track have not used a retirement calculator to run a projection — a first step in knowing how much they need to save;
- 47% have taken an investment risk tolerance assessment; and
- 31% rebalance their investment portfolio.
The report touts a six-step plan that employers can undertake to help their employees’ retirement preparedness:
1. Prompt workers to run an annual retirement projection
2. Set the plan automatic default deferral rate to 10%
3. Auto enroll employees in auto-rate acceleration
4. Offer benefits planning annually
5. Use communications to target specific demographics
6. Develop a comprehensive financial wellness program
