Where financial wellness falls short

If there’s one financial buzzword phrase that has dominated all others in the 401(k) world over the past several years, it might be “financial wellness.”

Employers like the concept because it has the potential to help their workers improve their financial decision-making and thus be more present and focused on the job. Retirement plan providers like it because it can help them win business or retain clients. And plan advisers have interest in part because it can expand their relationships with 401(k) participants, who can later become wealth management clients.

Participants also purport to want access to financial wellness services at work. Use of it, however, is another story.

Less than a third of employers offer it in some form, most often as it relates to retirement saving. And when those services are available, plan participants tend not to use them, according to a report Monday from TIAA.

Thirty-one percent of companies provide financial wellness related to retirement saving, which in some cases could include simply offering a 401(k) plan, data from that report show. When those services are available, about two-thirds of workers use them, TIAA found.

The report is based on an online survey of more than 3,000 people in October and November.

Employers offer other types of financial wellness help, including managing health care costs (16%), building emergency savings (14%), selecting investments (14%), retirement income (14%), debt management (13%) and saving for education (12%). But in most cases, less than half of workers use those services when offered, the survey found.


The top reasons that people cited for being leery of financial wellness were potential hidden costs (27%), not wanting to share financial information (25%), that the programs are less effective options than they could find on their own (20%) and that financial wellness simply wouldn’t make a difference (17%).

The youngest workers — members of Gen Z — were the most likely to say that employers have an obligation to provide financial wellness, with about two-thirds agreeing. But they were also the most likely to be hesitant about sharing the financial information necessary for those programs to help them, at 40%, according to TIAA’s report.

But when people use the services available through their employers, they are more likely to be on track in saving for retirement and show higher confidence that they won’t run out of money in their post-work lives.

The need for financial wellness is clear, TIAA found, as only about a quarter of workers have detailed budgets, 28% work with financial professionals, less than half can cover six months of expenses if laid off and nearly 60% are worried about their finances.

A recent report from John Hancock Retirement Plan Services had similar findings. More than 70% of workers said in a survey that they’ve felt at least moderate amounts of stress during the past six months, with a total of 58% of all people saying finances have been a factor.

Among people John Hancock surveyed, 89% said it’s important for employers to offer financial wellness. Nearly three-quarters said such programs could help reduce their overall stress, and two-thirds said the availability of financial wellness would make them more loyal to their employers.


Only 14% of companies provide stand-alone financial wellness programs for their workers, although another 60% have options that are related, according to a report last year from Callan. About half of employers surveyed their workers to identify their top financial needs, which were retirement savings, emergency savings and debt management. But the most common financial wellness benefits employers provide are life insurance, tuition assistance and critical illness support.

More than a third of companies that Callan surveyed said they were considering stand-alone financial wellness services for their employees. Among those that offer services of some type, 93% said information on the topic was provided by current service providers to the company, while 48% came from industry publications and 41% came from consultants or advisers.


“Many plans still don’t address questions about health care in retirement, the impact of divorce and the question of real estate, and other important financial questions,” Laura Varas, CEO of consumer research firm Hearts & Wallets, wrote in an email. “This is especially true for older Americans, who report a desire for advice on housing, their long-term work future and tax optimization.”

Resources on student loans, emergency funds and other types of saving have improved and become more available in recent years, Varas noted. “There’s still a long way to go to ensure Americans have the liquidity they need to buy homes, pay for college, meet other short-term goals in addition to the long-term goal of retirement saving, which is still prioritized by many in the industry.”

The biggest disconnect that financial wellness programs have is with older workers, Hearts & Wallets data show. People 55 and older are 10 percentage points more likely to recommend retail financial services rather than those offered through their employers. And only about 10% of people 55 to 74 said they rely on employer-sponsored programs as their go-to source of investing information or advice.

More tellingly, just a third of people in that age group who do use employer-provided resources said they understand where their retirement income will come from, according to Hearts & Wallets.

Affluent savers in that age range pointed to three main shortcoming in workplace financial resources: The advice is generic, representatives lack experience and there’s little proactive outreach, Varas noted.

To improve those programs, workers in that age group suggested adding pension-like income features to plans, providing more comprehensive advice and guidance on how long to work.

“Firms should recognize that consumers at different ages have different needs, both short and long term,” Varas said.

The post Where financial wellness falls short appeared first on InvestmentNews.

Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.

Andrew Vincent
Andrew is half-human, half-gamer. He's also a science fiction author writing for BleeBot.
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