Ah, retirement. Sleeping in, rocking on a swing on the porch, traveling to exotic locations. Overall enjoying old age and free time. It’s a daydream many people have of when they finally get to quit work.
That stable and relaxing retirement is something many people dream about. Unfortunately, few really expect to achieve it.
According to one survey, saving enough for retirement is ranked as the top concern of American workers.1
Another survey also found that saving for retirement was the top stressor – mentioned twice as often as the next.2
Sadly, the stress does not lead to increased retirement savings.
In fact, retirement saving in the U.S. is painfully low. One in five American adults have nothing saved for retirement at all. Only 22% of workers are completely confident they will be able to retire on time.3
If workers are so concerned about retirement, why are they not saving for it?
Many people blame their other expenses. 40% of workers say their bills prevent them from saving as much as they would like.3
Debt levels are also an issue. Workers with high debt are unlikely to contribute to retirement plans or contribute minimally.4
Some people simply don’t think they make enough money to save any of it. 54% of Americans live paycheck to paycheck, with little to no money left after paying their bills.5
Many workers understand the need to save for retirement but do not feel they can spare any money due to poor cash management or high debt levels.
That is why seminars focused on retirement savings are helpful but not overly effective. These seminars highlight the importance of contributing to retirement plans but do not address why people feel they cannot manage them.
Studies have shown that a holistic, ongoing financial wellness program helps solve multiple issues that are keeping retirement savings low.
In a recent financial wellness study6, employees who had just one single interaction with the financial wellness program had a contribution rate of 5.77%. But every time they interacted with the program again, their contribution rates increased. Workers with 5 or more interactions had a contribution rate of 11%. This is true even if the interactions are not retirement-related.
Why does this happen?
A financial education program designed for employees will do more than just harp on retirement savings. It educates employees on their other financial needs such as budgeting, saving, paying off debt, and much more!
Many programs, such as the Enrich Financial Wellness program, provide personal financial health assessments that help create a personalized financial education experience for each user.
As we saw earlier, an employee may want to save for retirement but not feel like they can.
A financial wellness program creates a path for the employee by giving them the tools they need to properly manage their money. This in return, will help the employee be able to contribute to their retirement and bring less stress and improve employee productivity at work.
Related article: Empower Employees to Prepare for Retirement with New Course
With a financial wellness program, they can learn about budgeting or reducing debt. That can lead to extra money, and then… voila! Increased retirement contributions.
Workers who are continuously engaged in a financial wellness program see their financial health score improve from 4.0 to 6.0. And their retirement contributions increase a staggering 38%.7
Related whitepaper: Behavior Change Data: a 12-month Study
Studies have shown that just a 1% increase in retirement contributions can significantly impact a nest egg when it comes time to retire.8 Just imagine what a 38% increase can do!
To sum up, there are a few reasons Americans are falling behind on retirement savings:
- Not enough money left over after bills
- Focused on paying down debt instead of saving
- Do not recognize the importance of saving (early and often) for retirement
A financial wellness program addresses all these issues:
- Educates and improves cash management skills
- Helps consumers create budgets and savings plans
- Helps to reduce debt through financial education and refinancing opportunities
- Educates on the importance of retirement savings and the impact of saving early thanks to compound interest
If you’re looking for one thing to do to increase retirement plan contributions and on-time retirement at your company, this is it.
A financial wellness program fits the bill perfectly.
1 - https://www.ebri.org/docs/default-source/fast-facts/ff-372-wwsfwb-3dec20.pdf?sfvrsn=824f3a2f_2
2 - https://www.pionline.com/assets/docs/CO110375512.PDF
3 - https://www.forbes.com/sites/greatspeculations/2019/03/20/the-retirement-crisis-is-much-worse-than-you-think/?sh=65416e473949
4 - http://www.401khelpcenter.com/ff/ff_wellness_impact_on_retirement_final_2012.html#.YY682r1KjOT
5 - https://www.prnewswire.com/news-releases/nearly-40-percent-of-americans-with-annual-incomes-over-100-000-live-paycheck-to-paycheck-301312281.html
6 - http://www.401khelpcenter.com/ff/ff_wellness_impact_on_retirement_final_2012.html#.YZPzFGBKguX
7 - https://www.plansponsor.com/analysis-shows-impact-financial-wellness-programs-retirement-readiness/
8 - https://www.fidelity.com/viewpoints/retirement/save-more