Financial Finesse’s review of financial wellness in 2018, released Tuesday, found that employees who used their financial wellness program regularly improved in all areas of financial planning.
The greatest improvement showed up in retirement preparedness. In 2013, 21% of study participants said they were prepared for retirement. By last year, that number had risen to 57%.
The study also showed that average retirement plan contribution rates rose to 9.4% from 6.3%, and average contributions to a health savings account increased by 41%, to $1,319 from $934.
Sixty-nine percent of employees who used financial wellness programs reported feeling confident in their investment strategy, up from 43% in 2013.
The study includes results of a multi-year study focusing on 2,458 employees who regularly engaged with their employer’s personal financial wellness program from 2013 to 2018 to determine how they progressed financially.
“The study’s findings have significant implications for what some industry experts have called a retirement crisis,” Financial Finesse’s chief executive Liz Davidson said in a statement.
“Employers have spent millions of dollars trying to address this problem, through incentivizing employees to save by matching their retirement plan contributions, automatically enrolling employees into their retirement plans, and providing employees target date fund and professionally managed accounts designed to invest their assets in line with their retirement goals.”
Davidson said each innovation has been touted as the solution to the problem — and these have had an effect — but getting American workers to save enough to retire comfortably has more challenging than originally expected.
Financial Finesse noted that in a recent survey conducted by Employee Benefit Research Institute and Greenwald & Associates, 70% of American workers said debt was negatively affecting their ability to save for retirement. And 55% of workers said they were 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,” the study’s co-author Greg Ward, director of the Financial Wellness Think Tank, said in the statement.
“The reality is that most employees need financial coaching to overcome these obstacles.”
Davidson noted that financial wellness programs are rapidly expanding, with more than 300 firms putting themselves forward as providers. These programs are a fast-growing employee benefit, and many employers consider them an imperative from a social mission perspective.
Financial Finesse pointed to a recent survey conducted from Alight Solutions in which 82% of employers cited believed that offering a financial wellbeing program was “the right thing to do.” And a MetLife study on employee benefit trends found that 53% of employees said their employers had a responsibility for their financial wellbeing.
“Companies that ignore this issue put themselves at a distinct disadvantage when it comes to recruiting and retaining talent,” Davidson said.