Employees are changing financial habits and want advice
Inflation is now the top obstacle to saving for a comfortable retirement, according to a new survey from Schwab Retirement Plan Services. The annual nationwide survey of 401(k) plan participants finds that workers rank inflation (45%) ahead of other obstacles including keeping up with monthly expenses (35%), stock market volatility (33%), and unexpected expenses (33%).
“Workers have been through a lot over the past two years and it’s only natural that recent economic and geopolitical turbulence has continued to fuel financial concerns,” said Catherine Golladay, Head of Schwab Workplace Financial Services. “While plan participants can’t control inflation or the markets, the good news is they are taking steps to manage their finances with an eye to the future.”
Workers believe they’ll need to save an average of $1.7 million for retirement, down from $1.9 million reported in last year’s survey, and just under half (47%) feel they are very likely to reach their retirement savings goal. They expect the 401(k) to be their primary financial resource in retirement, providing 37% of income, followed by Social Security (17% of income).
HR Technology News: Employees Reject Tentative Agreement; Kellogg Focuses on Continuing Operations
Workers change how they save, spend and invest
In response to rising costs and market volatility, 79% of workers are changing their saving and spending habits, while 44% have altered their 401(k) investments.
Workers are cutting spending by reducing the number of purchases they make (34%), buying cheaper products (32%), and paying off debt more slowly (21%). Despite the belt tightening, workers are still saving less (33%) and spending more in general (30%). They are saving less for emergencies (20%), investing less outside their 401(k)s (18%) and contributing less to their 401(k)s (15%).
Almost one quarter of workers say they plan to retire later as a result of the pandemic. One third of plan participants do not know how long their savings are likely to last in retirement, and the two thirds who offered an estimate say they expect their retirement savings to last 23 years on average.
Employers address financial stress among workers
Financial strain continues to take a toll on mental health. Only 15% of employees say they have not been under financial stress, and more than a quarter of respondents (26%) say stress about their financial situation has impacted their ability to do their job in the past year, similar to last year’s survey findings.
“Many workers say their employers have helped them manage financial stress in the past year,” said Golladay. “With talent management top of mind for so many employers, demonstrating support for employees through tough times plays a key role in both loyalty and recruitment.”
The majority of employers (60%) took action to help workers manage financial stress in the form of increased pay (32%), increased 401(k) match (23%), and additional bonus (20%). Some also decreased hours to allow for better work-life balance (11%).
HR Technology News: Instant Financial Strengthens Technology Partnership With UKG
Advice increases worker confidence
Most workers say their financial situation warrants professional advice (60%). More than half (55%) say they would be very confident making 401(k) investment decisions with the help of a financial professional, compared to just 38% who say they are very confident making 401(k) investment decisions on their own.
Specifically, plan participants want help with:
- How to invest their 401(k) account (43%)
- Calculating how much money to save for retirement (42%)
- Creating an income stream in retirement (38%)
- Determining at what age they can afford to retire (36%)
- Anticipating taxes in retirement (32%)
However, workers see barriers to accessing advice through their workplace plan. They cite cost (23%), advice limitations (22%), lack of awareness (19%), and confidentiality concerns (18%) among the reasons they wouldn’t seek financial advice via their employer.
“Workers are facing an array of economic challenges that are driving their demand for financial advice. Employers can help by debunking misconceptions about financial advice available through the workplace,” said Golladay. “Many employers offer different levels of advice at no additional cost or low cost, and workers tell us making 401(k) investment decisions with the help of a financial professional would make them more confident, which is one of the most important factors in their financial well-being.”
HR Technology News: CEIPAL Partners With CloudCall to Expand CRM Capabilities of Its AI-Powered Talent Management Platform
[To share your insights with us, please write to sghosh@martechseries.com]