According to a recent survey from Aon Hewitt, employers are generally happy with participation rates in their workplace retirement plans. However, the respondents said employees aren’t saving enough; just 15% of responding employers said they are satisfied with the amount of workers’ current savings.
Financial Health Strategies Top the List
These employers don’t plan to watch from the sidelines as the clock winds down. Instead, they are taking action with tools and strategies designed to encourage employees to save more. Recognizing that employees whose financial life is chaotic are unlikely to save enough to fund retirement, their chief focus is financial well-being initiatives.
In the Aon Hewitt report, 2017 Hot Topics in Retirement and Financial Wellbeing, nearly 90% of the 250 US employers responding said they are concerned about their workers’ level of understanding about how much savings they need in order to save enough for retirement. Of those, 87% report they are likely to take action in 2017 to help those workers make plans to reach their retirement goals.
“Employers are making retirement readiness one of the important parts of their financial well-being strategy by offering tools and modelers to help workers understand, realistically, how much they’re likely to need in order to retire,” said Rob Austin, director of Retirement Research at Aon Hewitt.
Merely understanding their starting point won’t necessarily encourage employees to act, though. That’s among the reasons employers are offering complementary tools.
“Some of these tools take it a step further and provide education on what specific actions workers can take to help close the savings gap,” Austin explained. The tools, he said, should help workers understand that even small changes, such as increasing 401(k) contributions by just 2 percentage points, can make an impact on the long-term savings outlook for employees.
Giving Employees the Tools They Need
Before they feel able to increase retirement contributions, though, employees may need help with their day-to-day finances. Workplace financial wellness programs have been increasing in popularity for several years now, and when the Aon Hewitt survey was conducted, 58% of employers said they have a tool available to cover at least one aspect of financial well-being.
That number, according to respondents, should reach 84% of employers by the end of 2017, with 92% of them saying they are likely to focus on workers’ financial well-being in ways that extend beyond retirement. They expect to deliver tools and programs to help with managing student loan debt, budgeting, and even physical and emotional well-being—all of which could contribute to a greater percentage of retirement ready employees.
Contributing to the popularity of workplace financial wellness programs is increasing acceptance of the consequences of a lack of financial health. According to HelloWallet’s research, 60% of Americans spend more each month than they earn; 81% don’t have enough savings to handle an emergency; and 25% who have a defined contribution plan say they have used at least some of the savings for non-retirement spending.
Maximizing Productivity Through Finances
The problems are pervasive. Depending upon which survey one reads, a majority of employees report spending time at work either worrying about or dealing with personal financial issues. Employers feel the impact, too. When employees spending time on these matters are not focused on their work, productivity is sure to suffer.
Providing financial wellness education and tools can help plug the productivity leaks, and not just for the largest firms.
“Financial well-being programs have moved from being something that a few leading-edge companies were offering to a more mainstream strategy,” Austin said. “Employers realize that offering programs that address the overall well-being of their workers can solve myriad challenges that impact people’s work lives and productivity, including their physical and emotional health, financial stressors, and long-term retirement savings.”
In fact, the survey found that 86% of employers are at least moderately likely to communicate the link between health and wealth to their employees this year.
The 2017 Aon Hewitt survey revealed a focus on more than retirement saving. Employers are also concerned with retirement income. A majority (51%) reported their defined contribution plan will now allow people to receive automatic payments from the plan over an extended period of time, rather than always paying out balances in a lump sum.
Read more about what to expect this year in the full report, available at aon.com.