Getting on the Track to Financial Wellness

A study by Lincoln Financial finds that 55% of workers in the U.S. say they are on the right track to achieving financial well being. The study looked into the lives of the right-trackers, and found these five factors contribute to their feelings of financial security and financial success:

  1. 71% have created a financial plan.
  2. 98% are focused on the future.
  3. 78% exercise at least once a week.
  4. 63% feel good about themselves, which makes them more optimistic.
  5. 57% are enrolled in more than three non-medical benefits.

Employees define financial wellness in these terms:

  • 29% Being prepared for unforeseen events that could affect my
  • financial situation.
  • 27% Living comfortably and having control over day-to-day finances.
  • 25% Having financial freedom that allows me to enjoy my life.”
  • 19% Other.

Voluntary benefits that improve financial wellness can boost the bottom line

People who are under financial stress are less productive employees, bringing down businesses’ bottom lines, studies show, but employers can help by offering education, tools and voluntary benefits. “In addition to securing online financial education resources, companies can take advantage of value-added programs and financial wellness platforms offered by their current benefit providers, as well as other non-traditional voluntary benefits, such as financial counseling services and employee purchase programs that address further aspects of financial wellness,” Elizabeth Halkos writes. (8/12)

Consumers Resist Robo Advisors

Financial services firms may be banking on automated robo advisors, but consumers are not buying into the idea. In a new GfK Global survey, only 9% of consumers said they would be likely to use an investment advisory service that offered just digital (text or online chat) contact with human advisors. The 25 to 34 age group is most open to the idea (15%) while less than 5% of those 50 and above would embrace an all-digital service approach from their investment firms.

Tom Neri, managing director of GfK’s Financial Services team in North America said, “Financial service companies need to be cautious in deploying robo-advisor technology, making sure to provide their high-value customers with the service they need. A one-size-fits-all seems certain to alienate even young investors. Financial firms are betting on an increasingly automated customer service approach to help them stay lean in an unforgiving consumer marketplace. But even digitally native Millennials are only lukewarm to this vision when it comes to the difficult area of investments.”

Consumers are least open to completely automated customer service for investments and mortgages. They are slightly more willing to accept an all-digital service plan for checking and savings accounts. Not surprisingly, just 10% of those surveyed would trust a computer algorithm over a human to give financial advice. Trust in robo-advisors is highest among the 25-to-34 group (17%) and lowest among those age 65 and over (6%).

Thirty percent would pay more for access to a person for help with financial services, and 45% would not be willing to forgo live customer service in return for paying less. Consumers’ hesitation to embrace automated investment services may stem from disappointing experiences. Only 27% agree that it is easy to get the information they need from the websites of financial service firms

More Companies Are Offering Financial & Emotional Wellness Programs

More companies are investing in total well-being programs to address financial and emotional health of their employees, according to a report by Fidelity Investments and the National Business Group on Health. Employers are adding programs that help employees manage stress, improve their resiliency, and meet financial challenges. In 2016, 87% of employers offer emotional or mental well-being programs, and 76% provide financial health programs. Sixty-seven percent plan to expand their efforts while 17% plan to maintain offerings at the current level. Adam Stavisky, senior vice president, Fidelity Benefits Consulting said that employers are focusing on things that affect well-being, such as emotional stress and financial challenges.

Mollie O’Brien is director of Total Rewards at BASF, which has more than 15,000 employees in the United States. She said that BASF has seen strong employee participation and engagement since launching its wellness program a few years ago. O’Brien said that the company is looking at strengthening financial wellness offerings to meet the needs of a diverse workforce.

By far, stress management is the most popular emotional well-being program. Fifty-four percent of employers offer this program and 12% plan to do so in 2017. Also popular is resiliency training, which helps employees manage setbacks in the workplace or outside of work. Twenty-seven percent of employers offer this program, with another 20% planning to do so in 2017.

Seventy-three percent of companies offer on-site financial seminars, and 59% make a financial coach available to employees. In 2016, 13% of employers offer student loan repayment assistance – a benefit that’s typically been offered only in the public sector. Another 21% are considering adding this benefit.

In 2015, 81% of employees received incentives, up from 73% in 2014. The percentage of employees receiving incentives increased steadily as employers expanded well-being programs. The number of employers using outcomes-based incentives is expected to drop from 44% in 2015 to 24% in 2016. Brian Marcotte, CEO and president of National Business Group on Health said that social factors and the work environment play an important role in employee engagement and their view of their well-being. Companies are integrating initiatives that focus on financial and emotional well-being, social connectedness, and job satisfaction with more traditional offerings

Employees Want Financial Guidance and Benefits

Forty-six percent of employees expect their financial situation to get better in the next year, and they’re turning to the workplace for financial education, according to a recent MetLife study. These financial concerns may be making employees more loyal, with 45% of employees planning to work for their current employer 12 months from now, compared to 41% last year. The study finds the following:

  • 47% of employees say that non-medical benefits can help limit their out-of-pocket medical expenses.
  • 52% of Millennials understand life insurance compared to 69% of Baby Boomers.
  • 38% of Millennials understand long term disability insurance compared to 57% of Baby Boomers.
  • 68% of Millennials prefer one-on-one consultations with a benefit expert, compared to 62% of Gen Xrs and 57% of Baby Boomers.
  • 44% of Millennials want their employer to help them solve their financial concerns compared to 20% of Baby Boomers
  • 75% of Millennials say employers have a responsibility for the financial well-being of employees.
  • 62% of employees are looking to their employer for more help in achieving financial security through employee benefits, compared to 49% in 2011.
  • 44% of employees feel in control of their finances.
  • 65% of Millennial employees don’t have a savings cushion of three months of salary.

The study finds that strong communication is a key driver of employee confidence when selecting benefits. The most effective resources are one-on-one consultation. Todd Katz, executive vice president, Group, Voluntary & Worksite Benefits, at MetLife said, “Employers looking to harness the power of one-on-one consultations can turn to outside experts such as brokers, consultants, and enrollment communications firms. For employers, this is an opportunity to evolve into a more consultative role and provide meaningful education and training for employees, while engendering loyalty. Helping employees understand the value of their benefits through engaging communications is critical for employee and for the workplace. If employees fully understand their benefit options, they’ll make better purchasing decisions and decrease their financial stress. To alleviate confusion about benefits, it’s critical that employers…enable their employees to make informed decisions about which benefits best suit their needs. This includes providing a variety of decision-support resources and offerings to help them make educated benefit decisions.”

401(k) Plans Don’t Get Reviewed Often Enough

A study by MassMutual reveals that many financial advisors don’t review retirement plans as often as many sponsors want. Fifty-seven percent of plan sponsors want advisors to help them review their retirement plans semi-annually or more often, but only 44% of sponsors say their their advisors do so. However, sponsors who rely on advisors typically review their retirement plans more often than those who don’t use an advisor.

Also, reviews often miss what’s most important. Tom Foster Jr. of MassMutual said, “Frequent, focused plan reviews are essential to…help ensure that plan participants are saving enough to retire when they reach their traditional retirement age. It’s a clear opportunity for financial advisors to improve and build their retirement plan practices.” Foster said, “Only one in four sponsors reviews its plan to determine whether employees are saving enough to retire…Any improvements to a plan should generally start with a careful review, and include consultation with plan legal counsel and other experienced advisors.”

During plan reviews, sponsors who work with an advisor typically prioritize satisfaction with their plan provider. Sponsors without an advisor prioritize fees and costs. Foster said, “Advisors can do a world of good to help employers focus on savings, the effectiveness of educational programs, and…whether their employees are on target to be retirement ready. Participation in the plan is certainly important too. If every employee participates, but each saves only 1% of his or her salary, it’s totally ineffective as no one will ever be prepared to retire.”

Medigap Continues to Provide Critical Financial Protection

Medicare supplement (Medigap) insurance remains a critical source of health coverage for low-income beneficiaries, particularly those living in rural areas, according to a  report from America’s Health Insurance Plans (AHIP). Enrollment has continued to grow over the past several years with more than 11 million Medicare beneficiaries enrolled in 2014. Medigap coverage helps cover significant out-of-pocket costs that are not covered by Medicare, such as deductibles, coinsurance, and copayments. As a result, Medigap beneficiaries are overwhelmingly satisfied with their coverage, and more than 9 in 10 would recommend Medigap to a friend or relative. The follow are key findings:

  • 48% of Medicare beneficiaries without any additional insurance coverage had Medigap policies in 2013.
  • 58% of Medigap policyholders in 2013 were women, and 42% were men.
  • 45% of Medigap policyholders were 75 years or older compared to only 38% of all Medicare beneficiaries.
  • 46% of rural Medigap policyholders and 39% of all Medigap enrollees had annual incomes below $30,000 in 2013.

American Workers Don’t Understand Their Benefits

While most Americans understand the importance of their personal finances and employee benefits, 40% say they know little or nothing about these benefits, according to a study from MassMutual. Most people seemingly have their financial house in order, saying they prioritize understanding their personal finances (77%), having enough medical insurance (74%) and being on track to retire comfortably (65%). Yet 38% say they know little or nothing about their employer-provided benefits, such as healthcare, life insurance, 401(k) retirement plans, and other benefits. Forty-two percent say they are clueless about whether or not they are on track to retire comfortably.

While many people say they do just fine managing their finances, 37% find doing so somewhat or very difficult and 40% say personal financial problems are a distraction at work, according to the study. Some groups find personal finance more difficult than others, including Millennials (58%), parents (50%), Generation X (47%), women (44%) and those with annual incomes of $50,000 or less (44%). Baby Boomers were the least likely to encounter difficulty in managing their finances (28%) or being distracted at work by financial issues (24%).
Eighty percent do not use an online financial tool to manage their retirement, healthcare and other forms of insurance. However, 73% say they would be likely to use such a tool if it were available free, especially if it were provided by a trusted and respected financial services company.

Millennials (82%), parents (80%) and Gen Xers (78%) are especially interested in using an online financial tool. Thirty-two percent said they would be more likely to enroll in their employee benefits if they could use an online tool to help them figure out their needs. Earlier this year, MassMutual launched MapMyBenefits, a free, online tool that enables employees to prioritize their benefit choices

Caregivers Face A Career Crisis

Providing care for loved ones has taken a toll on the careers of half of caregivers with 11% losing their jobs and another 10% having to change careers.  That’s in addition to the other financial, physical, and emotional effects of caregiving according to a Genworth study.

Fifty-one percent of caregivers say that that caregiving responsibilities impeded their ability to perform their jobs. The survey also reveals the following:

  • 77% missed some work during the past year, up 19% in 2010.
  • Caregivers missed an average of seven hours of work per week.
  • 19% missed 10 or more hours of work per week.

As a result of their caregiving responsibilities:

  • 11% lost their jobs.
  • 10% had to change careers.
  • 12% had to change positions.

Approximately one-third of caregivers provided 30 hours or more of care a week.  On average, caregivers lost one-third of their income. The study also highlights several factors that contribute to respondents’ reluctance to plan early. Thirty percent didn’t want to admit that long-term care may be needed and 25% didn’t want to talk about the issue.

Caregivers who had long term care insurance were reimbursed for 23% of their qualified out-of-pocket expenses. Forty-eight% of care recipients had considered the possibility needing long-term care, but only 26% made a plan to cover their potential needs. Even planners felt they could have been better prepared; 63% said they should have taken steps sooner, which would have led to reduced stress.

Americans’ Financial Security Increasingly Tied to Employee Benefits

Nearly two in three workers strongly believe that employers have a responsibility to offer insurance and retirement benefits. In stark contrast, only 16% of employers strongly believe they are responsible for providing benefits. Yet, employers acknowledge that workplace benefits help employees and their families achieve financial security, according to a survey by Guardian.

Forty-two percent of employees get most or almost all of their insurance products through the workplace while 68% rely on their benefits for at least half of their financial preparedness. Even when employers offer these benefits, many workers do not take advantage because of poor decision-making, ineffective communication, or education efforts. Employers can improve enrollment and the perceived value of these benefits by increasing communication and transparency.

Workers who get a total compensation statement from their employer place a greater value on their benefits and consider their company’s benefits communications effective; 87% report feeling more confident in their own benefit decisions. Nearly three in four employees who get a total compensation statement say that seeing information about the monetary worth of their benefits caused them to place greater value on them. Unfortunately, just one-third of employers report providing their employees with a total compensation statement.

Last Updated 10/20/2021

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