Financial Wellness a Key to Retirement Preparedness

Financial Finesse’s 2018 Financial Wellness Year in Review report includes the results of a multi-year study focusing on 2,458  employees who regularly engaged with their employer’s financial wellness program in the five years between 2013 to 2018. The study found that the employees improved in all areas of financial planning—with the greatest level of improvement in retirement preparedness.

In 2013, 21% of participants said they were prepared for retirement. By 2018, that had jumped to 57%.

Other improvements included a 50% increase in average retirement plan deferral rates, from 6.3% to 9.4%. Average contributions to a health savings account (HSA) rose by 41%, from $934 to $1,319. The percentage of people who felt confident in their retirement strategy rose from 43% to 69%.

“The study’s findings have significant implications for what some industry experts have called a retirement crisis,” says Liz Davidson, founder and CEO of Financial Finesse. “Employers have spent millions of dollars trying to address this problem, through incentivizing employees to save by matching their retirement plan contributions, automatically enrolling employees into their retirement plans, and providing employees target-date fund and professionally managed accounts designed to invest their assets in line with their retirement goals.”

Davidson says that while all of these efforts have had a positive impact, “getting millions of working Americans to save enough to retire comfortably has turned out to be much more complex than originally expected.”

Citing the 2019 EBRI/Greenwald Retirement Confidence Survey, Financial Finesse notes that 70% of workers say debt is negatively impacting their ability to save for retirement. Fifty-five percent say they are unable to save for retirement and other financial goals at the same time.

Davidson says successful financial wellness programs engage participants with online tools and resources and coaching by Certified Financial Planner (CFP) professionals.

The study also found improvements in: investing, college planning, estate planning, debt management, insurance, tax planning and cash flow. Those who said they have a handle on cash flow jumped from 67% to 80%, and those who have an emergency fund rose from 51% to 60%. Those who pay their bills on time each month went from 86% to 93%, while those comfortable with their level of debt increased from 58% to 67%.

The percentage of those who pay their credit card balances in full increased from 52% to 61%, and those who believe their investments are allocated properly went from 43% to 69%. Those who think they are on track to reach their income goal in retirement went from 21% to 57%.

A summary of report findings is here.