Technology: Talking to a Financial Coach Reboots Financial Wellness and Narrows Gender Gap
Original post businesswire.com
In a year marked by increased market volatility and slow economic growth, it’s not a surprise that overall financial wellness levels remained virtually unchanged. Employees appear stuck, hitting a brick wall with debt, lack of emergency funds and inadequate retirement savings. However, the latest study from Financial Finesse shows that the way forward to improved employee financial wellness – and to narrow the financial Gender Gap – could be human-to-human coaching, with technology playing a supporting role.
The Year in Review: 2015, an analysis of employee financial trends based on anonymous data collected by workplace financial wellness firm Financial Finesse, describes a year where most employees have been treading water in terms of their financial wellness. Overall financial wellness levels were unchanged at 4.8 out of 10 vs. 4.7 in 2014.
The study shows that while technology was helpful in increasing employee awareness of their financial vulnerabilities, online interactions alone did not improve employee financial wellness. By contrast, employees who had five interactions including conversations on the phone or in person with a financial planner professional showed substantial progress. Those repeat interactions with a financial coach appear to help an employee get “unstuck,” and advance in key areas. For these regular participants:
- 80% have a handle on cash flow, compared to 66% of online-only users
- 72% have an emergency fund, compared to 50% of online-only users
- 98% contribute to their retirement plan, compared to 89% of online-only users
- 48% are on track for retirement, compared to 21% of online-only users
- 64% are confident in their investment strategy, compared to 42% of online-only users
Employers who offer financial wellness programs consider tailoring communications to address these vulnerabilities in particular:
- 58% may not be saving enough for retirement, with only 16% of Millennials on track to achieve their retirement goals.
- 51% don’t have an emergency fund. While this declines with age, a worrisome 25% of employees 65 and older still don’t have an emergency fund.
- 34% may be living beyond their means. For employees with family incomes of $100,000 or lower, less than half pay off their credit cards every month.
- 33% may have serious debt problems. Debt may be hurting African American and Latino employees the most, with 75% of African American and 66% of Latino employees saying getting out of debt is a top concern.
- Concern over market volatility is high. Many employees grew nervous about their retirement plan savings and turned to their financial wellness program for guidance on how to handle these market fluctuations.
American Workers More Physically than Financially Fit
Originally posted April 22, 2014 by Lisa Barron on https://www.benefitspro.com
American employees see themselves as more physically fit (57 percent) than financially fit (28 percent), according to new research from the Principal Financial Well-Being Index: American workers.
The vast majority (84 percent), however, also believe that maintaining physical fitness is an investment in their financial future.
Still, nearly half of workers (46 percent) are stressed about their current financial situation. Fifty-one percent of Gen Y workers are stressed about finances compared to 35 percent of baby boomers. And those working with a financial advisor were less likely (33 percent) to be stressed about their financial future.
"American workers recognize the long-term financial benefits of staying healthy, but financial stress is often a constant pressure that can have a significant impact on their physical health," said Luke Vandermillen, vice president at the Principal Financial Group.
"With spring in full swing, now is a good time for Americans to apply their good fitness habits to their financial lives as well. Mark some time on the calendar for financial spring cleaning."
More than half (52 percent) say they have monitored their spending levels in the past year. Thirty-nine percent created a budget to keep finances in check, up from 28 percent two years ago.
Fifty-seven percent have an emergency fund in place, with those working with a financial profession about 1.5 times more likely to have one.
"It's encouraging to see American workers planning for unforeseen hurdles by giving themselves a financial checkup and setting aside money in an emergency fund," said Vandermillen.
"Despite a few missteps, like using the fund on monthly bills, these positive behaviors show individuals are making strides and taking personal responsibility to improve their short and long-term financial well-being."
The Principal Financial Well-Being Index: American Workers was conducted online among 1,123 employees at small and mid-sized businesses from Feb. 4-12.
Biggest boomer retirement regrets
Originally posted by Lisa Barron on https://www.benefitspro.com
The last of the baby boomer generation will be turning 50 this year, and it's time for them to get a fix on how they are going to prepare for retirement.
Fortunately, there are valuable lessons, financial and otherwise, to be learned from those who have already reached their later years.
On the financial front, there is of course room for many regrets. "Generally, the failure to have a plan is number one," Pete Lang, president of Lang Capital in Hilton Head and Charlotte, N.C., told BenefitsPro.
"I find people five years into retirement with no plan whatsoever."
Lang said that includes a tax plan, an income plan and an investment plan. Otherwise, he cautioned, "All your money is slipping through your fingers."
He left out an estate plan, Lang said, because while it may be needed for a financial blueprint it is not needed to retire, as are the other three.
On taxes, according to Lang, the biggest regret is the failure to use a tax-forward plan, such as deferring Social Security. "If you don't take it at 65 or 66, you can defer it and that will minimize taxes."
Other tax regrets include withdrawing money from tax-deferred IRAs too early, and not spreading Roth IRA conversions over a period of time.
As for income, Lang goes back to Social Security deferrals. "Everybody thinks the government will go out of business. That's not the case. The checks will always continue," he said.
"If the government gets into trouble with inflation, that's another issue. But the checks will be there, and deferral is a great way to guarantee enhanced income stream."
Finally, turning to investment, Lang said the big regret is the failure to hedge against inflation. "The inflation rate over the last 15 years has averaged 2.5 percent. And when you look at portfolios, they are also taxable. You have to use a tax co-efficient. I use 3.4 percent. So, if you're not growing at that rate you are not hedging money against inflation. If that's the case, you're losing buying power," he explained.
Given the risk inherent in equities and the current low yields on Treasuries, Lang said, "Use the standard rule to diversify a portfolio to create an income stream from safer allocations short term and in the long term from a more aggressive plan."
Clarence Kehoe, executive partner in accounting firm Anchin, Block & Anchin, told BenefitsPro he sees regrets over some very basic mistakes made during the peak earning years.
"From my experience, a lot of people when they get to retirement age look back and say 'why didn't I' or 'I wish I had,'" he said.
The two biggest killers are a lack of savings and a lack of understanding of how much will be needed in retirement, according to Kehoe.
"If you look at it realistically, many see a rise in income as they mature in their career, and when they see salaries go up, instead of saying now I have a chance to save, they are spending it. A lot of people don't pay attention, and don't say I have excess cash and I should save it," he said.
Going hand in hand with this is the problem of excessive borrowing. "Consumer debt has gone but the affluent person who wants a bigger house will have taken a mortgage or taken a second mortgage to take a vacation. Excess leveraging can squash the ability to save for retirement," Kehoe said.
Among other regrets sees is retiring too early. "There are people who have taken themselves out of the work force, some even in their mid- 50s, but they are robbing themselves of extra years of savings."
"A lot of people don't realize life expectancy is longer than they think, which means they need more money," he added.
Finally, Kehoe stresses the need to plan for age-related expenses. "People look at themselves unrealistically. They are not thinking about some of the extremes in older age. But even if you keep yourself in great shape your body wears down," he said.
That means more regular doctor visits, not all of which will be covered by the government or insurance, Kehoe warned.
Not all of the retirement-related regrets pertain strictly to finances, notes Daniel Kraus, an advisor and branch manager with Raymond James & Associates in Boca Raton, Fla.
One of the biggest one he sees among clients is the lack of a plan for what to do with their time. "A recent client commented, 'I'm bored. I don't know what to do with myself,'" Kraus told Benefitspro.
"After working for 50 years, he retired at 73 and said he wasn't prepared for the lack of activity. So there's a psychological impact of going into retirement that is dreadfully overlooked," he said.
Another area that can be overlooked has to do with way of life. "We do experience clients unwilling to change their lifestyle or unable to make that change," he said.
"I've got a client who's 84 and is burning down her money because she won't change her lifestyle. So that's an investment and psychology issue."
Another client can't make the tough decisions she needs to. "In her case, she knows she has to sell her real estate but she can't bring herself to price it at a price where it will sell," he explained.
"Retirement is all about making choices and compromise."
The person who isn't willing to change their lifestyle and runs out of money has regrets, said Kraus, as does the person who retired too early and finds the market is down and the person who pulled all of their money out of the market in 2008 and 2009 and put it in the bank.
His final cautionary tale: Regret is having long-term care expenses and not having planned for it.
Pointing to statistics showing that two-thirds of those over age 65 will incur long-term care costs, Kraus said, "There's nothing certain in life but death, taxes and long-term care."
U.S. corporate pension plans improve financial health in 2013
Originally posted March 20, 2014 by Michael Giardina on https://ebn.benefitnews.com
A new analysis of the 100 largest corporate pension plans finds that retirement coffers bounced back in 2013, reaching record funded-status levels and cutting away at pension deficits that have plagued them since 2008’s financial collapse.
In a new Towers Watson study, the year-end analysis finds that plan sponsors for the U.S. publicly traded companies reported significant gains through rising interest rates and beneficial investment returns.
With a nearly $170 billion drop in the group’s pension deficit, the Towers Watson report states that the overall funded status increased by 13 percentage points to 91%. That is the best funding level since the end of 2007, when the average stood at 103%. Additionally, the number of plan sponsors with fully funded plans surged from five at the end of 2012 to 22 at the end of 2013. At the end of 2007, half of these 100 plans were fully funded.
The average discount rate increased by 83 basis points to 4.85% in 2013, while investment returns averaged 10.8%.
According to the analysis, companies continued to contribute relatively large amounts to their plans during 2013, with sponsors’ median contribution being 60% more than the value of benefits accruing during the year. However, the contribution levels were much lower than in prior years. For 2013, plan sponsors contributed $27.8 billion, down from $45.2 billion in 2012. That’s the smallest contribution since 2008, when companies added $16.8 billion to their plans. After many years of making large contributions, some sponsors took contribution holidays or decided to contribute significantly less in 2013. Six of the 10 largest cash contributors in 2012 pumped $11.3 billion into their plans, compared with $0.8 billion in 2013.
“Plan sponsors made great strides to shore up the financial condition of their pension plans last year,” says Dave Suchsland, senior consultant at Towers Watson. “…This is good news for employers, as stronger pension fund balance sheets will reduce required cash contributions in the near term while lower pension costs will improve corporate earnings.”
Even with these benefits, Towers Watson expects that additional pension de-risking measures will be seen among corporate pension plan sponsors as they prepare themselves for the next downturn.
“The improved funded position, combined with recent increases in Pension Benefit Guaranty Corporation premiums and a newly released Society of Actuaries mortality study, will make de-risking actions very attractive in 2014,” says Alan Glickstein, senior retirement consultant at Towers Watson.
Previously, the PBGC premium increases, along with longer living retirees, were discussed by industry pension consultants. Mercer stated that plan sponsors need to consider investment policies and liability-driven investments, purchasing annuities for some or all plan participants and offering former employees lump-sum buyouts.
According to the PBGC, premium rates jumped up by $6 per participant in 2014 and $5 per $1,000 of unfunded vested benefits for single-employer plans. The single-employer rate increase was previously laid out in the Moving Ahead for Progress in the 21st Century Act, the PBGC says.
Mercer estimates that new mortality projections point to pension liability increases between 2% and 8% over the next few years. Gordon Fletcher, a partner in Mercer’s financial strategy group, stated earlier this month that new estimates point to individuals living to 87-years-old or slightly longer in some cases.
Plan Now to Celebrate National Employee Benefits Day on April 2nd
Originally posted on https://www.ifebp.org/
According to the Employee Benefits Research Institute, almost nine in ten people don’t think they’ll have enough saved when they get to retirement. Study after study provides data pointing to the same conclusion: A crisis is coming. Are your plan participants prepared for it?
This year, the focus of National Employee Benefits Day is to increase awareness of the retirement crisis, and to help plan sponsors motivate participants to actively engage in their financial wellness.
To help make financial wellness more urgent for your participants, we have created a number of resources that will help cut through the clutter and provide simple tools to get them thinking about their future.
Get started with these helpful handouts that explain key terms for: Retirement Plans [PDF],Investments [PDF] and Credit [PDF].
Employer actions need to catch up with financial wellness wishes
Originally posted December 12, 2013 by Andrea Davis on https://ebn.benefitnews.com
Employers are embracing the concept of financial wellness, with 81% of HR professionals saying they believe they are at least somewhat responsible for their employees’ financial wellness, according to a survey released this week by Bank of America Merrill Lynch.
Seventy percent of the 1,000 companies surveyed offer various forms of education related to retirement and, to a lesser extent, planning for health care costs (38%), as well as debt management and budgeting (15%).
And while employers say they’re interested in the concepts of financial wellness and retirement readiness, their actions may have some catching up to do. Less than half of large companies (48%) has a financial wellness strategy in place for employees or plan to add one in the next two years. Among medium-sized companies, the percentage drops to 43%. Among small companies, 26% have a financial wellness strategy in place or plan to add one in the next two years.
“It will be interesting to see how quickly do they then adopt practical, tangible programs to realize their aspirations of what they want to do with their employees,” says Kevin Crain, senior relationship executive for Bank of America Merrill Lynch. “It’s still early stage in their thinking.”
Perhaps not surprisingly given all the attention the Affordable Care Act is receiving, one-third (32%) of HR professionals say they’ve increased the time they spend educating employees about the role workplace benefits play in their financial security.
One area many employers agree needs greater focus and employee education is the rising cost of health care. Eighty-one percent of companies report an increase in health care costs during the last two years, and many admit to having had to pass these rising costs along to their employees. The study found that more than one-third (35%) of employers now provide employees with education about what health care could cost them during retirement, up from 21% in 2012. Among employers who provide at least some education about retiree health care costs, nearly half (45%) believe more needs to be done in this area.
“Employers now understand their employees need far more transparent and easier ways to understand what the cost of health care will be in the future,” says Crain. “The health care expense piece [of retirement] was always, in my mind, not as robust as it could have been.” With all the attention on the ACA, health care costs in retirement is an issue “that’s been brought to the forefront,” he says.
Workers stressed over finances
Originally posted November 15, 2013 by Maria Wood on www.lifehealthpro.com
Employees are more aware of their financial shortcomings, but with that increased awareness comes greater strain on their psyches. That was the major takeaway of a recent survey by Financial Finesse, a provider of fiscal education.
The third-quarter “Trends in Employee Financial Issues” survey revealed that 19 percent of employees report “high or overwhelming” levels of financial stress, up from 13 percent in the same quarter of last year. Similarly, 41 percent expressed uncertainty regarding their ability to achieve future financial goals, a significant jump from 34 percent in the third quarter of last year and 33 percent in Q3 2011.
What has them so worried? The U.S. economy and stock market were cited by 43 percent of employees as the major stumbling blocks to a secure financial future. That’s an increase from 42 percent Q3 2012 and 40 percent in 2011’s third quarter.
Employees in the upper age range – 45 and older – were the most anxious. According to the survey, 84 percent of those 45 or older admitted to some level of financial stress, up from 80 percent a year ago and 74 percent in the third quarter of 2011. Financial Finesse researchers attributed that escalation to the immediate and conflicting pressure those in that age group may be facing, such as paying for college for their children and caring for aging parents while at the same time trying to save for retirement and confronting higher health-care costs.
Awareness and action
The overall employee financial wellness score dipped below five (4.9) for the first time since the first quarter of 2012. Yet that decline, emphasized the Financial Finesse researchers, is not due to worsening cash and debt management – areas where employees are maintaining good habits. (For example, 88 percent said they pay their bills on time each month, the same percentage as the previous quarter.) Instead, the researchers conclude it is due to employees heightened awareness of their financial challenges.
Consequently, they are taking steps to address their concerns, at least at the older age bands. Forty-eight percent of employees who took a financial wellness assessment were 45 or older in the latest survey, an upward arc from 44 percent in the same quarter of last year and 43 percent in Q3 2011.
It’s also translating into improved retirement planning. When queried if they were on target to replace at least 80 percent of their income, or goal, in retirement, 19 percent answered yes compared to 18 percent a year ago and 12 percent in the third quarter of 2011. The older one gets the more they have made that calculation, with the highest percentages seen at 55-64 (23 percent) and 65 and older (33 percent).
Rising participation in work-based retirement plans was also charted, with the percentage climbing from 87 percent in Q3 2012 to 90 percent in the latest survey. More employees said they have used a retirement calculator: 39 percent in Q3 compared to 34 percent in the prior year.
Will U.S. workers ever be able to retire?
Original article from usatoday.com
Despite the rebound in home prices and new all-time nominal highs in the stock market, many Americans are looking at an unpleasant retirement, if they even make it that far; according to the Employee Benefit Research Institute's latest survey on retirement confidence, the majority of workers have saved for their golden years, but the piggy bank is quite slim.
Excluding the value of a primary home and any defined benefit plans, 57% of households say they have less than $25,000 in savings and investments, while 28% say they have less than $1,000. Furthermore, the Center for Retirement Research at Boston College has warned that 53% of American households are at risk of not having saved enough to maintain their living standards in retirement.
Americans are still planning for retirement, but, as one would expect, how they have saved for retirement depends very heavily on age and on pre-retirement income.
Compared to other countries' retirement systems, that of the United States doesn't stand up well. In a recent report, the Mercer consulting firm and the Australian Center for Financial Service, gave the United States a "C" grade, a rating considerably worse than the A received by Denmark and the B-plus given to the Netherlands' retirement system, which combines a Social Security-like fund with a nearly universal pension system to which employers contribute. The study showed plainly that many other countries are more willing than the United States to mandate unpleasant steps by workers and employers to fund a stable system.
The United States does have some mandates; employers must pay 6.2% of each employee's salary into Social Security, and every employee must also contribute that amount. But the Social Security system faces the threat of a huge shortfall. One-third of America's retirees get at least 90% of their retirement income from the program, with annual benefits averaging a modest $15,000 for an individual.
Another important pillar of America's retirement system, the 401k, is voluntary and generally not accessible to low-wage workers, who may not have the income necessary to invest. Although some employers have embraced automatic enrollment for their workers, more than 58% of American workers are not in a pension or 401k plan. Those employees with such plans, whose payouts are dependent on contributions and investment returns, are exposed to the risks associated with the stock market, which after the financial crisis were quite great.
The problems associated with these two primary means of saving dictate which financial sources fund the retirements of lower-wage workers and higher-wage workers. Gallup's annual Economy and Personal Finance poll, conducted between April 4 and April 14 of this year, sampled more than 2,000 adults to discover how non-retired Americans expect to fund their retirement. The results show that expectations varied significantly by annual household income. Upper-income retirees primarily said that investments, such as 401ks, or individual stock investments would fund retirement, while lower-income respondents said that Social Security and part-time work would be major sources.
In fact, of those respondents earning $75,000 or more per year, 65% said that retirement savings accounts would be the "major source" of retirement funds, and only 17% said Social Security. Comparatively, 42% of respondents earning less than $30,000 per year said Social Security would be a major source of income, 27% said work-sponsored pension plans, and another 27% said part-time work.
Younger generations of workers, particularly the 18 to 29 year-old bracket exhibited uncertainty about the future of the Social Security. Gallup found that only about one in five young adults expected to receive a Social Security benefit when they retire. Fifty-three % of respondents from the youngest age group said that they expected to fund their retirement through 401ks, while 49% said savings accounts or CDs and 24% said part-time work.
When looking at retirement strictly through the lens of age, the poll's results show the changing nature of retirement funding. Young respondents are looking to sources outside of Social Security to support them after they stop working, but those nearing retirement age now see Social Security contributing significantly to income — the program is essentially tied with 401k plans as the top source among 50 to 59-year old non-retirees, and it is the number one source among non-retirees aged 60 and older.
Moms Lead Way In Discussing Family Finance
Original article from insurancenewsnet.com
By Mark Jewell
BOSTON -- Who's better at getting a family to talk about money matters, mom or dad? Taking sides probably won't make for a harmonious Mother's Day celebration.
Yet a survey by a financial services company found that mothers clearly have the upper hand over fathers in getting the discussion started with their adult children. While all families are different, moms are often the ones who encourage conversation about such important topics as financial security in retirement, caring for an elder and estate planning, according to survey results released Tuesday by Fidelity Investments.
"Moms are more likely and open to having deep, detailed discussions," saidLauren Brouhard, a senior vice president for retirement with Fidelity's personal investing business.
"Starting the discussion with mom may be a good strategy," given how awkward such conversations can be, Brouhard said.
Key findings from the Boston-based company include:
- Seventy percent of the mothers aged 55 and older who were surveyed reported they'd had comprehensive discussions with their adult children about their ability to cover living expenses in retirement. Just 55 percent of fathers had talked about that topic.
- Seventy-nine percent of the moms had discussed estate planning or wills with their adult children, compared with 69 percent of fathers.
- Sixty-six percent of mothers had discussed health topics such as caring for elders, while 56 of the dads had done so.
- Sixty-four percent of mothers said it is "not at all difficult" to start a conversation with an adult child about savings and investing, versus 54 percent of fathers who said that.
One reason that mothers were more open to discussing such matters: They were more likely to describe themselves as the "the empathizer" in their families. Fifteen percent of moms said that was the case versus 6 percent of fathers describing themselves that way. Fathers were more likely to view themselves as "the pragmatist" in discussing finances, believing they take a more straightforward approach than mothers.
When asked privately about these hard-to-discuss topics, survey participants offered widely varying views on whether their families were discussing money matters in sufficient detail, if they were having the conversations at all.
In many instances, adult children who participated in the surveys "felt that the conversations were not happening at the level of depth required," Brouhard said.
"What's really important is that these not just be surface discussions. Nobody wants surprises down the road, so it's important that they have these conversations now, when they're not reacting to some financial or health emergency."
The survey was conducted from July 24 to Aug. 29 by the firm GfK, with Fidelity not being identified to survey participants as the sponsor. GfK used its KnowledgePanel sample, which first chose participants for the nationwide study using randomly generated telephone numbers and home addresses. Once people were selected to participate, they were interviewed online. Participants without Internet access were provided it for free.
The total sample recruited for the study included 975 parents who were 55 years or older, had an adult child and investable assets of at least $100,000.
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Offer Your Employees Financial Wellness With Lunch
Your employees have seen a reduction in their pay. Likely a reduction that they couldn't afford to see. We want to educate them as to why and how they can leverage these changes to help plan their futures and ensure their financial wellness. Show them that their company understands the impact this payroll tax change has had at home and that you are there to help them. It is important that they know your company is not the root of the issue.
It's Easy!
Your employees will participate in a survey, either online or on paper. We won't gather any personal information. We are just looking to fully understand how your employees feel about their financial wellness and the areas they feel they need education.
We Do All the Work!
We will compile the results and provide those to you so to see the areas of need. The results are yours to keep to use in any way you choose in your efforts to better assist and educate your work force.
Employees Get Fed!
That's Right! We will not only come on-site and provide lunch, but we will also feed your employees with financial education based on the information we gathered from the survey.
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