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Employees’ financial priorities have shifted away from long-term retirement savings over the past year toward short-term financial needs, including paying off credit card debt and saving for emergency expenses, new data shows.
Economic uncertainty is causing the shift of employees’ financial priorities, according to the “Bank of America 2023 Workplace Benefits Report,” published September 26.
For employees, saving for retirement continues to be the top overall goal, but more immediate “pressing needs” are getting prioritized, according to Bank of America researchers. Fewer employees—31%, in 2023—are prioritizing long-term retirement savings, compared with 45% last year, shifting their focus to short-term financial needs, Bank of America found.
Inflation has played a role in pushing up the focus on short-term needs at the expense of retirement savings, the findings showed. Employees have shifted financial priorities to paying off credit card debt, increasing activity to 16%, compared with 11% in 2022; and saving for emergencies, at 13% in 2023 versus 8% in 2022, data shows.
“American workers continue to feel stressed about their finances and are concerned about keeping up with the cost of living,” said Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America, in a press release.
Plan sponsors can take actions that workers will appreciate in terms of managing their finances, the bank noted. The report found that 92% of employers who offer resources to manage financial well-being saw improvement in employee satisfaction.
“Companies who show a sense of urgency for their workforce by offering financial wellness programs and resources which support employees’ immediate needs and overall well-being will continue to stand out as employers’ of choice,” Sabbia stated.
For plan sponsors, Bank of America recommended employers act to support workers by promoting greater retirement readiness:
- Offer employees digital tools that connect them to guidance and retirement income resources;
- Expand educational programs on planning for retirement and include information on Social Security and Medicare; and
- Work with the retirement plan benefits provider to analyze plan data to uncover disparities among different employee segments and to explore plan-design options that could help close the gaps.
Low Wellness Score
The Bank of America report found that 67% of employees in June 2023 were feeling the impact of inflation, compared with 58% in February 2022.
Inflation reached 6.4% in February 2022, lessening to 4.8% in June 2022 and moderated further to 4.3% in August 2022, according to the latest data available.
Workers are stressed about their financial situations, with 42% rating their feelings of financial wellness as good or excellent, the lowest figure reported by Bank of America since 2010.
Feelings of financial wellness vary by ethnicity and location; the research showed 61% of Asian employees rate their financial wellness as good or excellent, followed by white workers at 44%; Hispanic at 40%; and Black workers at 35%.
The report also found that less than 25% of employees living in urban areas feel prepared for retirement, compared with 32% of suburban employees and 43% of rural employees.
Employees, themselves, favor the following measures.
- A four-day work week (58%);
- Guaranteed income offerings in the retirement plan (42%);
- Wellness reimbursement (39%);
- Family care assistance (35%); and
- Benefits that specifically support women (27%).
Plan sponsors reported believing offering better pay and benefits than competitors, among other factors, will help their companies attract qualified candidates or increase hiring.
Bank of America sourced data for the report from an Escalent survey, a national sample of 878 employees working full-time and participating in 401(k) plans and 798 employers who offer a 401(k) plan and have sole or shared responsibility for decisions made in the plan. The survey was conducted between January 9 and February 1.
