Employees Look to Employers for Financial Stability

Do your employees depend on their pay and benefits for their financial security? Find out in this great article by Nick Otto from Employee Benefit News on what employees depend on from their employers to support their financial well-being.

As the American dream of financial security continues to slip out of reach for many U.S. workers, employers — seen as trusted partners by employees — will need to step up to restore faith in retirement readiness.

Only 22% of individuals described themselves as feeling financially secure, Prudential says in its new research paper, and there is growing acceptance among employers that there is significant value in improving employees’ financial wellness.

Aspirations are modest, says Clint Key, a research officer in financial security and mobility at The Pew Charitable Trusts. Between economic mobility or financial stability, an overwhelming 92% of workers say they want stability.

“Four in 10 don’t have the resources to pay for a $2,000 expense,” he said Tuesday, at a joint financial wellness roundtable sponsored by Prudential Financial and the Aspen Institute in Washington, D.C. More alarmingly, employees don’t have the income to last a month if they were to lose their job.

Still, Key adds, it isn’t so much the number of dollars in the bank, but the peace of minds that savings buy them.

And employers are feeling the repercussions of the growing stressors in the workplace.

“People who are stressed about finances are five times more likely to take time off from work to deal with personal finances,” added Diane Winland, a manager with PricewaterhouseCoopers. “Three to four hours every week go to handling personal finances, and these employees are more likely to call out sick from work.”

The security levers once in place, such as home equity, are going away and it’s becoming much more difficult for workers to handle a financial emergency, she added.

The good news, however, is employers get it, she said. “They understand employee financial wellness is tied to the bottom line and it behooves them to invest in their employees,” said Winland. “The conundrum is how to deploy and what to deploy in their programs. Is it counseling? Coaching? Is it a new snazzy app that comes out. The key is there is no silver bullet.”

So, what is there to do?

Each employer has a unique business model and employee base, and, therefore, faces different challenges when implementing a financial wellness approach, Prudential’s paper notes. “Employers should design financial wellness programs that are informed by insights into the unique financial needs of their employees, successfully educate and engage employees, and help employees take concrete actions to improve their financial health. We encourage employers to discuss financial wellness with their benefit consultants or advisers.”

And, added Robert Levy, managing director at the Center for Financial Services Innovation, just talk to your employees. “They’re open to discussing their financial challenges,” he said, and employers can engage these conversations through numerous ways: surveys, one-on-one talks, focus groups.

Prudential stepping up

To try to change the current unease in financial security, Prudential Tuesday also announced its expansion of worksite tools for employers to enable them to analyze the financial needs of their workforce and offer the employees a personalized interactive experience that includes videos, tools, webinars and articles that empower them to manage their financial challenges.

In addition, Prudential has launched a $5 million, three-year program in partnership with the Aspen Institute — a Washington, D.C.-based, non-partisan educational and policy studies organization — to promote employees’ financial security.

“The investment highlights the need to increase the national discourse about greater economic access for employees as they bear increasing risk and responsibility for their short-term and long-term financial security,” said Prudential.

See the original article Here.

Source:

Otto N. (2017 May 18). employees look to employers for financial stability [Web blog post]. Retrieved from address https://www.benefitnews.com/news/employees-look-to-employers-for-financial-stability


Millennials, Gen X Struggle With the Same Financial Wellness Issues

Millennials and Generation X have a lot more in common than they think. Check out this great article by Amanda Eisenberg from Employee Benefit News and find out about the major financial issues facing both Millennials and Generation X.

From student loans and credit card debt to creating an emergency fund and saving for retirement, older millennials are beginning to face similar financial well-being problems as Gen Xers.

Financial stress among millennials decreased to 57% from 64% last year, which is more in line with the percentage of Gen X employees who are stressed about their finances (59%), according to PwC’s “Employee Financial Wellness Survey”.

“As much as millennials want to be different, life takes over,” says Kent Allison, national leader of PwC’s Employee Financial Wellness Practice. “You start running down the same path. Some things are somewhat unavoidable.”

Half of Gen X respondents find it difficult to meet their household expenses on time each month, compared to 41% of millennial employees, according to PwC.

Seven in 10 millennials carry balances on their credit cards, with 45% using their credit cards for monthly expenses they could not afford otherwise; similarly, 63% of Gen X employees carry a credit card balance, especially among employees earning more than $100,000 a year, according to the survey.

“The ongoing concern year after year — but they don’t necessarily focus on it —is the ability to meet unexpected expenses,” Allison says. “It’s stale but there are reoccurring themes here that center around cash and debt management that people are struggling with.”

With monthly expenses mounting, employees from both generations are turning to their retirement funds to finance large costs, like a down payment on a home.

Nearly one in three employees said they have already withdrawn money from their retirement plans to pay for expenses other than retirement, while 44% said it’s they’ll likely do so in the future, according to PwC.

Employees living paycheck to paycheck are nearly five times more likely to be distracted by their finances at work and are twice as likely to be absent from work because of personal financial issues, according to PwC.

The numbers are alarming, especially because Americans are already lacking requisite retirement funds, says Allison.

“Two years ago, the fastest rising segment of the population in bankruptcy is retirees,” he says. “I suspect we’re going to have that strain and it may get greater as people start to retire and they haven’t saved enough.”

Employers committed to helping their employees refocus their work tasks and finances should first look to the wellness program, he says.

“Focus on changing behaviors,” says Allison. “The majority of [employers] use their retirement plan administrators. You’re not going to get there if you don’t take a holistic approach.”

Meanwhile, employees should also be directed to build up an emergency fund, utilize a company match for their 401(k) plans and then determine where their money is going to be best used, he says.

They can also be directed to the employee assistance program if the situation is dire.

“It’s intervention,” Allison says. “At that point, it’s too late.”

See the original article Here.

Source:

Eisenberg (2017 April 27). Millennials, gen x struggle with the same financial wellness issues [Web blog post]. Retrieved from address https://www.benefitnews.com/news/millennials-gen-x-struggle-with-the-same-financial-wellness-issues


Starting Early is Key to Helping Younger Workers Achieve Financial Success

Starting early is the best way to ensure dreams for life after work are realized, but when TIAA analyzed how Gen Y is saving for retirement, it found 32 percent are not saving any of their annual income for the future.

Knowing the importance of working with young people early in their careers to educate them about the merits of saving for a secure financial future, here are some approaches tailored to Gen Y participants:

  • Encourage enrollment, matching and regular small increases – Enrolling in an employer-sponsored retirement plan is a critical first step for Gen Y participants. Contributing even just a small amount can make a big difference, especially since younger workers benefit most from the power of compounding, which allows earnings on savings to be reinvested and generate their own earnings.

    Encouraging enrollment also helps younger workers get into the habit of saving consistently, and benefit from any matching funds. Emphasize the benefits of employer matching contributions as they help increase the amount being saved now, which could make a big impact down the line. Lastly, encourage regular increases in saving, which can be fairly painless if timed to an annual raise or bonus.

  • Help younger workers understand how much is enough – We believe the primary objective of a retirement plan is offering a secure and steady stream of income, so it’s important to help this generation create a plan for the retirement they imagine. Two key elements are as follows:
    • Are they saving enough? TIAA’s 2016 Lifetime Income Survey revealed 41 percent of people who are not yet retired are saving 10 percent or less of their income, even though experts recommend people save between 10 to 15 percent.
    • Will they be able to cover their expenses for as long as they live? Young professionals should consider the lifetime income options available in their retirement plan, including annuities, which can provide them with an income floor to cover their essential expenses throughout their lives.

      Despite the important role these vehicles can play in a retirement savings strategy, 20 percent of Gen Y respondents are unfamiliar with annuities and their benefits.

  • Provide access to financial advice – Providing access to financial advice can help younger plan participants establish their retirement goals and identify the right investments. By setting retirement goals early, and learning about the appropriate investments, Gen Y participants can position themselves for success later on.

    The good news is TIAA survey data revealed Gen Y sees the value financial advice can provide, with 80 percent believing in the importance of receiving financial advice before the age of 35.

  • Understand the needs of a tech-savvy and digitally connected generation – It’s important to meet this generation where they are—on the phone, in person or online. We’ve learned that this generation expects easy digital access to their financial picture, and we offer smartphone, tablet and smartwatch apps in response.
    • Engage Gen Y with digital tools - Choose ones that educate in a style that does not preach and allows them to take action. One way to reach Gen Y on topics such as retirement, investing and savings is through gaming.

      We’ve found that the highest repeat users of our Financial IQ game are ages 24-34, and that Gen Y is significantly more engaged with the competition, with 50 percent more clicks.

Perhaps more than any other generation, Gen Y needs to understand the importance of saving for their goals for the future even if it’s several decades away.  Employers play an integral role in kick-starting that process: first, by offering a well-designed retirement plan that empowers young people to take action; and second, by providing them with access to financial education and advice that encourages them to think thoughtfully about their financial goals—up to and through retirement.

See the original article Here.

Source:

McCabe C. (2017 April 14). Starting early is key to helping younger workers achieve financial success[Web blog post]. Retrieved from address http://www.benefitspro.com/2017/04/14/starting-early-is-key-to-helping-younger-workers-g?ref=hp-in-depth&page_all=1


5 Benefits Communication Mistakes That Kill Employee Satisfaction

Are you using the proper communication channels to inform your employees about their benefits? Take a look at this great article from HR Morning about how to manage to communicate with your employees to keep them satisfied at work by Jared Bilski.

Good benefits communication is more important than the actual benefits you offer – at least when it comes to employee satisfaction.
Proof: When a company with a rich benefits program (i.e., better than industry standard) communicated poorly, just 22% of workers were satisfied with their benefits.

On the other hand, when an employer with a less rich benefits program communicated effectively, 76% of employees were satisfied with the benefits.

These findings come from a Towers Watson WorkUSA study.

At the at the 2017 Mid-Sized Retirement & Healthcare Plan Management Conference in Phoenix, AZ., Julie Adamik, the former head of Employee Benefits Training and Solutions at PETCO, highlighted the five most common benefits communication mistakes that put firms in the former category.

Satisfaction killers

1. The information is boring. Many employees assume that if the info is about benefits, it’s probably boring. As a result, they tend to tune out and miss critical material.

2. The learning styles and preferences of different generations aren’t taken into account. With multiple generations working side-by-side, a one-size-fits-all approach is doomed to fail.

3. The budget is too low. If your company has a $15 million benefits package, you shouldn’t accept upper management’s argument that a $2,500 communication budget should cover it. HR and benefits pros need to take a stand in this area.

4. The language is “too professional.” Assuming that official-sounding language is better than “plain speak” is a common but costly communication mistake.

5. There’s too much information being covered. Cramming everything into a single open enrollment meeting is guaranteed to overwhelm employees.

Cost, wellness, personal issues and care

Employers also need to be wary of relying too heavily on tech when it comes to benefits communication. Even though there are plenty of technological innovations in the world of benefits services and communications, but HR pros should never forget the importance of old-fashioned human interaction.

That’s one of the main takeaways from a recent Health Advocate study that was part of the whitepaper titled “Striking a Healthy Balance: What Employees Really Want Out of Workplace Benefits Communication.”

The study broke down employees’ preferred methods of benefits communications in a number of areas. (Note: Employees could select more than one answer.)

When asked how they preferred to receive health cost & administrative info, the report found:

  • 73% of employees said directly with a person by phone
  • 69% said via a website/online portal, and
  • 56% preferred an in-person conversation.

Regarding their wellness benefits:

  • 71% of employees preferred to receive the info through a website/online portal
  • 62% said directly with a person by phone, and
  • 56% preferred an in-person conversation.

In terms of personal/emotional wellness issues:

  • 71% of employees preferred to receive the info directly with a person by phone
  • 65% preferred an in-person conversation, and
  • 60% would most like to receive the info via a website/online portal.

Finally, when it came to managing chronic conditions:

  • 66% of employees preferred to receive the info directly with a person by phone
  • 63% would most like to receive the info via a website/online portal, and
  • 61% preferred an in-person conversation.

See the original article Here.

Source:

Bilski J. (2017 April 4). 5 benefits communication mistakes that kill employee satisfaction [Web blog post]. Retrieved from address http://www.hrmorning.com/5-benefits-communication-mistakes-that-kill-employee-satisfaction/


Half of Mature Workers Delaying or Giving Up on Retirement

Did you know that now more than ever Americans are giving up on their dreams of retirement? Find out about the somber facts facing the older generation of workers in the great article from Benefits Pro by Marlene Y. Satter.

It’s a grim picture for older workers: half either plan to postpone retirement till at least age 70, or else to forego retirement altogether.

That’s the depressing conclusion of a recent CareerBuilder survey, which finds that 30 percent of U.S. workers aged 60 or older don’t plan to retire until at least age 70—and possibly not then, either.

Another 20 percent don’t believe they will ever be able to retire.

Why? Well, money—or, rather, the lack of it—is the main reason for all these delays and postponements.

But that doesn’t mean that workers actually have a set financial goal in mind; they just have this sinking feeling that there’s not enough set aside to support them.

Thirty-four percent of survey respondents aged 60 and older say they aren’t sure how much they’ll need to save in order to retire.

And a stunning 24 percent think they’ll be able to get through retirement (and the potential for high medical expenses) on less than $500,000.

Others are estimating higher—some a lot higher—but that probably makes the goal of retirement seem even farther out of reach, with 25 percent believing that the magic number lies somewhere between $500,000–$1,000,000, 13 percent shooting for a figure between $1–2 million, 3 percent looking at $2 million to less than $3 million and (the) 1 percent aiming at $3 million or more.

And if that’s not bad enough, 26 percent of workers 55 and older say they don’t even participate in a 401(k), IRA or other retirement plan.

With 74 percent of respondents 55 and older saying they aren’t making their desired salary, that could play a pretty big part in lack of participation—but that doesn’t mean they’re standing still. Eight percent took on a second job in 2016, and 12 percent plan to change jobs this year.

Predictably, the situation is worse for women. While 54.8 percent of male respondents aged 60+ say they’re postponing retirement, 58.7 percent of women say so.

Asked at which age they think they can retire, the largest groups of both men and women say 65–69, but while 44.9 percent of men say so, just 39.6 percent of women say so.

In addition, 24.4 percent of women peg the 70–74 age range, compared with 21.1 percent of men, and 23.2 percent of women agree with the gloomy statement, “I don’t think I’ll be able to retire”—compared with 18 percent of men.

And no wonder, since while 21.7 percent of men say they’re “not sure” how much they’ll need to retire, 49.3 percent of women are in that category.

Women also don’t participate in retirement plans at the rate that men do, either; 28.3 percent of male respondents say they don’t participate in a 401(k), IRA or other retirement plan, but 35.4 percent of female respondents say they aren’t participating.

For workers in the Midwest, a shocking percentage say they’re delaying retirement: 61.6 percent overall, both men and women, of 60+ workers saying they’re doing so.

Those in the fields of transportation, retail, sales, leisure and hospitality make up the largest percentages of those putting off retirement, at 70.4 percent, 62.5 percent, 62.8 percent and 61.3 percent, respectively. And 46.7 percent overall agree with the statement, “I don’t think I’ll be able to retire.”

Incidentally, 53.2 percent of those in financial services—the largest professional industry group to say so—are not postponing retirement.

They’re followed closely by those in health care, at 50.9 percent—the only other field in which more than half of its workers are planning on retiring on schedule.

And when it comes to participating in retirement plans, some industries see some really outsized participation rates that other industries could only dream of. Among those who work in financial services, for instance, 96.5 percent of respondents say they participate in a 401(k), IRA or comparable retirement plan.

That’s followed by information technology (88.2 percent), energy (87.5 percent), large health care institutions (85.8 percent—smaller health care institutions participate at a rate of 51 percent, while overall in the industry the rate comes to 75.5 percent), government employees (83.6 percent) and manufacturing (80.2 percent).

After that it drops off pretty sharply, and the industry with the lowest participation rate is the leisure and hospitality industry, at just 43.4 percent.

See the original article Here.

Source:

Satter M. (2017 March 31). Half of mature workers delaying or giving up on retirement [Web blog post]. Retrieved from address http://www.benefitspro.com/2017/03/31/half-of-mature-workers-delaying-or-giving-up-on-re?ref=mostpopular&page_all=1


Expert: The staggering new retirement savings number millennials have to hit

Have your millennial workers started saving for retirement? If not take a look at this great article from HR Morning about the amount of money millennials need to save for retirement by Christian Schappel.

Want to jolt your younger workers into contributing more to your company-sponsored retirement plans? Just show them this figure. 

After looking at several studies, estimates and financial experts’ opinions, Robert Powell, USA Today’s retirement planning expert and editor of Retirement Weekly, is predicting that millennials will need upwards of $2.5 million saved to comfortably retire.

That estimate is for the youngest millennials — those born in the late 1990s.

The news isn’t quite as bleak for those born in the 1980s. Their retirement savings goal, according to Powell: $1.8M.

Why so much?

Here are the numbers behind the estimates.

Powell’s assuming millennials will need to live on between $30K and $40K annually in retirement (in today’s dollars).

Plus, a modest rate of inflation (2%) will make $1M of today’s dollars worth about $530K in 32 years, and roughly just $386K in 48 years.

You can see Powell’s breakdown in more detail here.

The bottom line is this: For today’s millennials to hit that $2.5M number in 48 years, Powell said they’d need to save about $1,000 per month — and that’s assuming there’s 5% growth on their investments annually. That’s a staggering amount that, most likely, your employees aren’t coming close to hitting.

Still, every little bit helps. And if these figures can encourage employees to increase their savings even a little, they’ve done their job.

See the original article Here.

Source:

Schappel C. (2017 February 23). Expert: the staggering new retirement savings number millennials have to hit [Web blog post]. Retrieved from address http://www.hrmorning.com/expert-the-staggering-new-retirement-savings-number-millennials-have-to-hit/


Why sitting is the new office health epidemic

Is your health starting to suffer from sitting down at work all day? Take a look at this interesting piece from Employee Benefits Advisor about the effects that sitting down all day can have on your health by Betsy Banker.

In the continuing conversation about employee health, there’s a workplace component that isn’t getting the attention it should— and it’s something that workers do the majority of every workday.

Sitting has become the most common posture in today’s workplace, and computer workers spend more than 12 hours doing it each day. Science tells us that the consequences are great, but our shared cultural bias toward sitting has stifled change. Many employees and company leaders struggle to balance well-being and doing their work. And it’s time for employers to do something about it.

Rather than accept the consequences that come as a result of the sedentary jobs employees (hopefully) love, it’s time to elevate the office experience to one that embraces movement as a natural part of the culture. Such a program will address multiple priorities at once: satisfaction, engagement, health and productivity. Organizations of every size and structure should embrace a “Movement Mindset” and say goodbye to stale, sedentary work environments.

There are many benefits to incorporating the Movement Mindset:

· Encourages face time. As millennials and Generation Z take over the office, attracting and retaining top talent is a key initiative for companies. Especially in light of the Society for Human Resource Management findings that 45% of employees are likely to look for jobs outside their current organization within the next year. Research has shown that Gen Z and millennials crave in-person collaboration, and users of movement-friendly workstations (particularly those ages 20 to 30) report being more likely to engage in face time with coworkers than those using traditional sit-only workstations.

Standing meetings tend to stay on task and move more quickly. Their informal nature means they can also be impromptu. Face time has the added benefit of building culture and social relationships, increasing brainstorming and collaboration, and creating a more inclusive work environment.

· Keeps you focused. For those who sit behind a desk day in and day out -- which, according to our research, about 68% of workers do -- it can be a feat to remain focused and productive. More than half of those employees admit to taking two to five breaks a day, and another 25% take more than six breaks per day to relieve the discomfort and restlessness caused by prolonged sitting. It may not seem like much, but considering that studies have shown it can take a worker up to 20 minutes to re-focus once interrupted, this could significantly impact the productivity of today’s office workers.

It’s time to connect the dots between extended sitting, the ability to remain focused and the corresponding effect these things have on the overall health of an organization. Standing up increases blood flow and heart rate, burns more calories and improves insulin effectiveness. Individuals who use sit-stand workstations report improved mood states and reduced stress. Offering options for employees to alternate between sitting and standing during the day could be the key to effectively addressing restlessness while improving focus and productivity.

· Addresses sitting disease. The average worker spends more than 12 hours in a given day sitting down. In the last few years, the health implications surrounding a sedentary lifestyle are starting to come to light (like the increased risk of heart disease, diabetes and early mortality). It’s a vicious cycle where work is negatively affecting health, and poor health is negatively impacting engagement and productivity. Not to mention, the benefits span long and short term, with impacts on employee absenteeism and presenteeism, as well as health and healthcare costs. Offering sit-stand options to incorporate movement back into a worker's daily regimen is a great way to offset those implications, while showing employees that their health, comfort and satisfaction are important to the company. Plus, a recent study found that if a person stood for just an extra three hours a day, they could burn up to 30,000 calories over the course of a year — that’s the same as running 10 marathons or burning off eight pounds of fat.

Our sit-biased lifestyles are beginning to be seen as an epidemic; it’s the new smoking, and office workers who spend their days behind a desk are at great risk. Providing a sit-stand workstation is more than just a wellness initiative. It offers significant opportunities for companies to retain and attract talent, improve a company's bottom line, and offer employees a workspace that gives them the ability to move in a way that can actually improve productivity.

Embracing the Movement Mindset can turn the tables on the trends, going beyond satisfaction to create a cycle where work can positively impact health and good health can improve engagement and productivity.

See the original article Here.

Source:

Banker B. (2017 March 27). Why sitting is the new office health epidemic [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/why-sitting-is-the-new-office-health-epidemic?feed=00000152-1387-d1cc-a5fa-7fffaf8f0000


Financial stress hurts emotional, physical well-being of workers

Did you know that your emotional and physical well-being can take a hit when you are under financial stress?  Here is an interesting article from Employee Benefits Advisors about the correlation between financial stress and mental and physical health by Amanda Eisenberg.

Americans aren’t able to save for their financial goals, and that stress is affecting their emotional and physical well-being.

A new study by Guardian Life Insurance found that financial outlook is the most significant driver of working Americans’ overall well-being, constituting 40% of the insurance company’s Workforce Well-Being Index, and money is cited as the No. 1 source of stress for a majority of workers.

“Even among people working full-time with benefits, many still do not have access to adequate insurance coverage or retirement plans,” says Dave Mahder, vice president and chief marketing officer of Guardian’s Group and Worksite Markets business. “And few take advantage of the health and wellness programs available through their employers, which often contain a much broader menu of resources than workers realize.”

Millennials are one of the subsets of employees who do participate in benefits that can help alleviate financial stress, the survey found.

“Millennials want marketing to them,” says Gene Lanzoni, assistant vice president of thought leadership for Guardian Life. “It’s not enough these days to say, “This is someone like you,” to do with your benefit selection. That’s what the challenge is for millennials. It’s not enough of an engaging process for them.”

Half of millennials surveyed in Guardian Life’s “Fourth Annual Guardian Workplace Benefits Study” said they don’t have disability insurance, while a third have yet to sign up for a retirement plan.

They are not the only group of employees struggling to purchase voluntary benefits like disability and life insurance; single working parents are also feeling the heat.

One in three single working parents does not have a retirement plan, compared to 20% of the 1,439 workers surveyed. Similarly, one in four workers doesn’t have life insurance, and one in three workers doesn’t have disability insurance, according to the survey.

“Many of those working parents are struggling to balance work and personal life, and they may not be able to afford some of the protection products,” says Lanzoni. “Some of that discretionary income might not go toward paying a voluntary disability plan.”

To offset expenses, Americans are increasingly turning to debt, whether through loans or credit cards, to temporarily relieve their financial burdens.

Four in 10 Americans have car loans, 32% of workers are carrying a mortgage, 17% have student loans and 12% have home improvement debt, according to the study. Overall, 75% of Americans are carrying debt.

Non-mortgage debt — particularly auto and education loans — contributes to lower financial wellness; those carrying the most total debt, including mortgages and rent, report considerably lower overall well-being, according to Guardian Life’s report.

Employers can also help alleviate the burden by providing education to employees, among other services, says Lanzoni.

The survey found that employer-sponsored voluntary insurance products and college tuition or loan repayment programs help with financial wellness, as well as employee assistance programs that can identify financial, emotional and physical issues that lead to stress.

See the original article Here.

Source:

Eisenberg A. (2017 March 13). Financial stress hurts emotional, physical well-being of workers [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/news/financial-stress-hurts-emotional-physical-well-being-of-workers?feed=00000152-1387-d1cc-a5fa-7fffaf8f0000


Two-thirds of Americans aren’t putting money in their 401(k)

Did you know only about a third of Americans are putting money away into their retirement accounts? Check out this interesting article from Employee Benefits Advisors about some of the statics of Americans 401(k) savings by Ben Steverman.

(Bloomberg) – Americans aren’t saving enough for retirement.

True, this has been a refrain for longer than many can remember. But now some disturbing numbers show exactly how bad it’s gotten. Two-thirds of all Americans don’t contribute anything to a 401(k) or other retirement account available through their employer.

Millions aren’t saving on the job because they either don’t have access to a workplace retirement plan or they do but aren’t putting money in it. Many just can’t spare the cash, but a new analysis shows there are other reasons, too.

Until now, the exact size of the problem has been unclear. Surveys can be unreliable: Small businesses are difficult to assess, and many workers just don’t know what plan options they have, especially if employers aren’t making much effort to sign them up. Information on a 401(k) may be part of a stack of paper handed out on their first day, that they don’t read or understand, and ultimately set aside and never think about again.

Now, U.S. Census Bureau researchers have come up with estimates that rely on tax data, which should be more reliable than surveys. Their conclusion: Only about a third of workers are saving in a 401(k) or similar tax-deferred retirement plan. Also, the gap is far wider than expected between the number of employers offering retirement plans, and the number of workers saving in them.

Only 14% of employers offer plans

Census researchers Michael Gideon and Joshua Mitchell analyzed W-2 tax records from 2012 to identify 6.2 million unique employers and 155 million individual workers, who held 219 million distinct jobs. This data produced estimates starkly different from previous surveys.

For example, previous estimates suggested more than 40% of private-sector employers sponsored a retirement plan. Tax records uncovered a much bigger pool of small businesses, showing that, overall, just 14% of all employers offer a 401(k) or other defined contribution plan to their workers.

Bigger companies are the likeliest to offer 401(k) plans, and since they employ more people than small firms, skew the overall number of U.S. workers who have the option. Gideon and Mitchell estimate 79% of Americans work at places that sponsor a 401(k)-style plan. The good news is that’s more than 20 points higher than previous estimates. The bad news is that just 41% of workers at those employers are making contributions to such a plan—more than 20 points lower than previous estimates.

The combined result of those two numbers is that just 32% of American workers are saving anything in a workplace retirement account. Four out of five workers are employed by companies that offer a 401(k) or similar plan, but most workers aren’t using them—either because they’re not eligible or because they aren’t signing up.

Lawmakers have proposed a variety of ways to get more people to save. Several states are experimenting with strategies to get every worker signed up for a retirement account. But they face serious pushback from the Republican-controlled Congress and the financial industry.

The demise of the pension

Census researchers are still studying the tax data, cross-referencing it with other databases to get a fuller picture of how Americans are saving. For example, researchers are using retirement plan filing documents to get a better sense of how many workers are still covered by traditional pensions, also known as defined benefit plans. According to a Pew Charitable Trusts analysis of survey data released Feb. 15, only 10% of workers over age 22 have a traditional pension. Just 6% of millennials have a pension while 13% of baby boomers do.

Not surprisingly, the Census data suggest well-paid workers find it easier to save than the lowest-paid. But income isn’t the only factor. Eligibility is also a major issue for part-time workers and people who change jobs frequently. Companies often require employees to work for a certain amount of time before they can sign up for a 401(k), and employers aren’t required to allow part-time workers into a plan until they’ve worked 1,000 hours during the previous year.

Another problem made clear by the new report is that many workers simply don’t know their company 401(k) exists. Workers also might never get around to filling out the paperwork, or could be intimidated and confused by the need to make investment decisions. Companies can help solve all those problem by automatically signing up eligible workers, and requiring them to opt out if they don’t want to participate. Doing so has been proven to boost enrollment, but momentum has now stalled for automatic 401(k) features.

House moves to block auto-enrollment

California, Oregon, Illinois, Maryland, and Connecticut have started programs designed to encourage workers to save. Employers in those states would be required to either offer a retirement plan, or automatically enroll their workers in a state-sponsored individual retirement account. The states had the blessing of the Obama administration, which issued rules allowing states and even large cities to create portable retirement accounts if they want.

On Feb. 15, however, the U.S. House of Representatives voted to rescind those rules. Echoing the arguments of the financial industry, Republicans argued state auto-enrollment plans constitute unfair competition to the financial industry. If the Republican-controlled U.S. Senate and President Donald Trump also sign off, any state and city auto-IRA plans would be placed in jeopardy.

Whatever the outcome, any effort to get workers to save for retirement faces a daunting challenge: Can Americans spare the money? Student debt and auto loans are at record levels, according to Federal Reserve data released Feb. 16, and overall consumer debt is rising at the fastest pace in three years.

Retirement is an important goal, but many Americans seem to have more pressing financial concerns.

See the original article Here.

Source:

Steverman B. (2017 February 21). Two-thirds of americans aren't putting money in their 401(k) [Web blog post]. Retrieved from address http://www.employeebenefitadviser.com/news/two-thirds-of-americans-arent-putting-money-in-their-401-k?feed=00000152-1377-d1cc-a5fa-7fff0c920000


Only 1 in 3 employees actually understands how their 401(k) works

Do all of your employees understand how their 401(k) works? If not check out this article from HR Morning on the statistics of about 1 in 3 employees that do not understand their 401 (k) by Jared Bilski,

When it comes to common financial vehicles like 401(k) plans, term life insurance, Roth IRAs and 529 college savings plans, most workers could use some education on the finer points.  

In fact, according to a recent study by The Guardian Life Insurance Company of American, one-third or  less of employees said they had a solid understanding of the most common financial products.

Problem areas

Here is the specific breakdown from the Guardian Life study on the percentage of worker that said they have a solid understanding of various financial products:

  • 401(k)s and other workplace retirement plans (just 32% of workers said they had a solid understanding)
  • IRAs apart from Roth IRAs (27%)
  • Individual stocks and bonds (26%)
  • Mutual funds (25%)
  • Pensions (25%)
  • Roth IRAs (24%)
  • Term life insurance (23%)
  • Separately managed accounts (23%)
  • Disability insurance (23%)
  • 529 college savings plans (23%)
  • Whole life insurance (22%)
  • Business insurance, such as key person insurance or buy/sell agreements (20%)
  • Annuities (19%)
  • Universal life insurance (19%), and
  • Variable universal life insurance (18%).

Education vs. no education

One of the best ways to help workers garner a better understanding of their finances — and the financial products available to them — is through one-on-one education.

Consider this example:

The Principal Group compared the saving habits and financial acumen of workers who attended a one-on-one session the organization offered one year to those who didn’t.

What it found: Contribution rates for those who attended the session were 9% higher than those who didn’t. Also, 19% of the workers who received education opted to automatically bump up their retirement plan increases with pay increases, compared to just 2% of other employees.

Also, 92% of the employees who were enrolled in Principal’s education program agreed to take a number of positive financial steps, and 80% of those workers followed through on those steps.

See the original article Here.

Source:

Bilski J. (2017 January 27). Only 1 in 3 employees actually understands how their 401(k) works [Web blog post]. Retrieved from address http://www.hrmorning.com/only-1-in-3-employees-actually-understands-how-their-401k-works/