Work Ahead: Rebuilding Financial Wellbeing and Retirement Security through the Workplace | SFA - Millennium Trust Company

Work Ahead: Rebuilding Financial Wellbeing and Retirement Security through the Workplace

April 8, 2021
By Millennium Trust
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Just as severe weather can damage critical infrastructure, like roads and bridges, the economic upheaval of 2020 impaired the financial wellbeing and retirement security of millions of American workers.

According to an August 2020 Pew Research Center survey, financial hardships experienced during the Covid-19 pandemic included:

  • Job loss and/or layoffs (25%),
  • Difficulty paying bills (25%) and
  • Withdrawing money from savings/retirement accounts to pay bills (33%).

Surveys of employers that offer workplace retirement plans indicate participants have lowered deferral rates and adopted more conservative asset allocations. In addition, many workers are feeling less certainty about whether they will be able to save enough to live comfortably in retirement.

One bright spot in the economic chaos of 2020 was the emphasis on workplace financial wellness programs.

EBRI’s 2020 Workplace Wellness Survey found that, although relatively few workers have access to financial wellness programs at work (35%), the vast majority of those who participated found the program to be somewhat (36%), very (29%) or extremely (25%) useful.

The Principal® Retirement Security Survey indicated workers’ top priorities for improving financial wellness in 2021 include:

  • Saving more
  • Spending less
  • Paying down debt
  • Tracking financial accounts more closely
  • Building emergency savings

Boosting workers’ financial health can improve productivity.

As new stimulus checks and vaccines are distributed, employers are assessing the state of their workers’ financial stress, since money worries can greatly reduce productivity.

Many employers are adopting solutions that can help employees rebuild financial wellness and retirement security. These solutions include:

  • Initiating retirement plan communication and education campaigns to reinforce the importance of saving, deferrals and employer matching contributions (when applicable). Plan participants who choose their investments, rather than opting for a target date fund or similar option, should be reminded about the need to manage risk through periodic rebalancing.
  • Evaluating whether re-enrollment is the right option. For companies that have done well during the pandemic, re-enrollment can give employees a necessary nudge. Re-enrollment may include enrolling non-participants and increasing deferral rates.

    For companies that experienced challenges during the pandemic, especially organizations that have experienced layoffs or furloughs, the effects of re-enrollment should be considered carefully. Communication will be particularly important, especially if employees experienced income loss or incurred significant healthcare bills.

  • Expanding resources that support financial wellness. Financial wellness programs gained prominence in 2020, and employers are providing expanded access to resources that promote financial wellbeing.

    In June 2020, a DCIIA survey indicated that emergency savings accounts, finance and budgeting education, student debt assistance and out-of-plan guaranteed income options were becoming a priority for employers to provide to workers as a benefit.

    Emergency savings solutions, in particular, are high-value additions to financial wellness programs for two reasons. First, they give employees opportunities to build liquid savings, and second, they help protect retirement savings.

    All too often, people who experience emergencies take distributions from retirement plan accounts to meet the immediate expense, which can greatly reduce retirement savings over time.

There are many ways employers can help workers rebuild financial wellbeing and retirement security as the economy recovers, and in turn, improve employee productivity and help the business.

If you would like more information about Millennium Trust’s retirement services or workplace solutions, please get in touch.

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The material in this blog is presented for informational purposes only and does not constitute tax or legal advice. Millennium Trust Company performs the duties of a directed custodian, and as such does not offer or sell investments or provide investment, legal or tax advice.

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