Financial anxiety can shoot tentacles into the workplace, according to PwC US’s 2015 Employee Financial Wellness Survey, with one in five respondents admitting that issues with personal finances are a distraction at work. 

Fewer than half think they will be able to retire when they desire, and employees’ top financial concerns are having enough emergency savings and being able to retire when they want.

One interesting statistic, says Kent Allison, partner and national practice leader of PwC’s employee financial education and wellness practice, is that Generation Y (often called Millennials) was lagging even more in the previous survey. This year, through some belt tightening they are showing some improvements in their spending and savings habits. The numbers are still somewhat gloomy, Allison tells PLANSPONSOR. “I’d be more concerned if this were the first year of survey,” he says, but there is definitely a slow trend in improvement. “Fewer people are living paycheck to paycheck or carrying a balance on credit cards.”

Allison warns that the numbers are still concerning. “Forty-seven percent are still carrying balances on credit cards,” he says, “and 30% of Gen Y find it difficult to meet minimum payments.” The numbers show that one in three people are having persistent cash flow issues, so while these figures are better, they’re still high, relative to the issue. 

Gen Y is particularly intriguing. “They are the most at risk,” Allison says. Where Baby Boomers and Generation X had assets stored away, which helped fuel their turnaround, Allison says that Gen Y does not have these assets. “Their recovery has been a result of belt tightening and dropping some credit card debt.” The number of foreclosures has dipped, but home ownership among Gen Y members is also down.

Headwinds for Gen Y

Gen Y financial stress is a matter of job stability, cash flow and stagnant wages, Allison says, coupled with a relatively high debt load from credit cards and student loans. They lack cash reserves, making this generation more sensitive to income and cash flow issues.

“The two fast-growing demographics for bankruptcy are seniors and Gen Y,” he notes. “Gen Y’s spending habits are clearly more focused on the here-and-now than they are on the future. But they are all recognizing that they are the ones responsible for funding their retirement.”

While retirement confidence has increased over the past few years (up 16 percentage points to 43% since 2012), most employees still are not confident in their ability to retire when they want. One in five (21%) aren’t saving for retirement at all. 

Intentions are good, but the follow-through is shaky. Not being able to access retirement plan assets before retirement would deter just 21% of respondents from contributing, but the survey found that more than one-third (35%) of working adults are likely to withdraw money from their retirement accounts to pay for non-retirement expenses.

Employees have largely accepted that responsibility for funding retirement is up to them, and 70% say they should be primarily responsible as opposed to their employer or the government.

“As pension plans fast become outdated, employees are realizing that they face the burden of funding their retirement,” Allison observes. “Still, employers need to help ensure that their workforce understands how to assemble enough savings to live comfortably in retirement. We’re seeing a rise in the promotion of health savings accounts [HSAs] as one solution.”

Just one-third of employees contribute to an HSA, Allison says, and far fewer of those contributing, 16%, plan to use the funds for future health care costs in retirement. His recommendation is that employers should begin to emphasize the need for employees to educate themselves about long-term health planning.

The survey perceived improvements across all generational demographics. Financial stress for Millennials, though still significant, slipped a bit, from 60% in 2014, to 52%. Future planning is also more difficult for Millennials. One reason is that nearly 80% think Social Security benefits either won’t be available or will be reduced significantly by the time they retire. This generation appears to be most in need of retirement planning assistance. Although employees have accepted that retirement is in their own hands, many don’t possess the knowledge or confidence to grasp control of their retirement and future finances. For instance, among the 53% of Baby Boomers planning to retire within the next five years, just half know how much income they will need in retirement.

PwC’s Employee Financial Wellness Survey tracks the financial and retirement well-being of employed U.S. adults, incorporating the views of more than 1,700 full-time employees. The survey can be downloaded here.