Workers’ Financial and Retirement Concerns Have Shifted

Significant shifts occurred over the last year in the needs of workers, their financial concerns and attitudes towards retirement, Mercer data shows.  

The COVID pandemic, inflation, and market volatility have brought large-scale changes for employees and plan sponsors, finds the Mercer study, the New Shape of Work-Inside Employees’ Minds

This year’s Mercer study shows declines in employee satisfaction in several areas from 2021, speakers explained during a webinar that presented the results.

“After two years of continual existential crises—the [COVID] pandemic, a war in Europe, inflation, and political and social upheaval—employees are more focused on securing their financial, physical, and emotional health and well-being than by achievement and climbing the ladder,” the report states.

Among respondents, 64% agree that benefits offered at their current company are as good or better than those of competitors, compared to 73% in 2021; and 61% of workers in 2022 feel adequately compensated, compared to 68% in 2021.  

“A key takeaway from the analysis is that retirement is a primary concern for many employees,” said Katie Hockenmaier, U.S. defined contribution research leader at Mercer, in an email. “Inflation and market volatility are fueling some of these concerns and employees are looking to employers for not only additional matching contributions into the [defined contribution] retirement plan, but also more flexible match designs. We [also] found that employees found it attractive if an employer would offer matching contributions in a [defined contribution] retirement plan on student loan debt repayments, a provision that is currently being proposed within ‘SECURE 2.0.’”

Workers may be less satisfied but the study also shows 64% of workers currently consider leaving their employer down from 73% last year.

Workers are making changes to address their concerns, as 67% of individuals earning $60,000 or less have reduced their spending as have 59% of employees earning more than that, the study shows; 29% of the lower-earning cohort have reduced their savings, compared to 31% of the higher-earning group; and 29% those earning $60,000 or less report having taken on additional work, compared to 19% of higher earners.  

The top concerns for workers have also shifted since last year, the study shows.

The concern that drew the largest share of responses—up from No. 9 in 2021—was covering monthly expenses at 11.1%, followed by being able to retire, 9.1% and workload and life balance, at 8.6%, the Mercer study finds. The 2021 report showed physical health and fitness was the top concern for workers, 10.3%, workload and life balance was next at 8.6% and mental/emotional health third at 8.2%. In 2021, being able to retire was No. 5 in the list of top concerns, at 7.4%, the study showed. 

“With better health and safety measures at work and a lesser threat posed by [COVID], employees are less concerned about physical health this year than last, though it still claims the top spot for men,” Mercer’s report states.

Mercer advises plan sponsors, because needs change rapidly, to identify employees top concerns right now and to not rely on historical data to prioritize solutions that can assist workers.

Additionally, Mercer counsels employers to engage in active listening with workers to understand their top needs.

“Well-being concerns top the list this year. Employees’ basic needs for security are not being met,” the Mercer report states. “Employers should prioritize employee support – including culture, work practices and benefits.”

The Mercer study also reveals the preferred defined contribution features most attractive to workers:  They are increasing employer contributions, 43%; employer match contributions for paying down student loan debt, 42%—No. 1 for workers under 45%; and employer match contributions for contributions to health savings accounts, 38%— second most preferred for workers below age 35.

“Younger employees in particular may not have the disposable income to contribute to retirement savings, and by matching retirement contributions for expenses that are often a significant portion of income, like student loans and healthcare costs, you can help them build their nest egg early—reducing stress and increasing retirement confidence for the future,” added Hockenmaier. 

The next most-preferred features were penalty-free distributions for emergency expenses; 32%, penalty-free distributions for terminal illness; 24%; and penalty-free distributions to purchase long-term care insurance, 18%, the study finds.  

The Mercer study includes responses from 4,049 full-time employees in the U.S., working for organizations with more than 250 employees. The study was conducted between August 26 and September 9.