American employees in 2016 made gains in overall financial wellness, powered by an increase in repeat usage. More employees reported running retirement projections, revealing improvement in overall retirement preparedness. There continues to be wide disparities between employees in the lowest and highest financial wellness levels, driven by differences in financial behavior.

Executive Summary

Financial wellness improved for the average American employee in 2016, aided by an increase in the percentage of repeat usage of workplace financial wellness programs. Repeat users in 2016 recorded higher levels of financial wellness in cash flow and debt management, retirement preparedness, and investment confidence. The average overall employee financial wellness score1 improved to 5.4, up from 4.7 in 2015.

Retirement Preparedness

Increase In Retirement Projections

Retirement preparedness has improved, driven by more employees running retirement projections. This is good news for employers that face significant costs due to delayed retirement from employees that are underfunded or don’t have an idea whether or not they have enough to retire. The simple act of running a retirement projection may be the single most important step employees can take to reach retirement goals. By running a retirement projection, about four in ten discovered they are underfunded and in need of making changes with respect to how much they save, how they invest, and how they prepare for retirement. The remaining six in ten discovered they are on track for retirement, increasing confidence in their ability to achieve retirement goals. Despite the progress, over half (51 percent) of employees that completed a financial wellness assessment in 2016 remain in the “unknown” category (i.e., they haven’t run a retirement projection and don’t know if they are on track to reach retirement goals).

Retirement Preparedness

Behavior More Than Demographic Is Key Difference In Financial Wellness

Despite overall improvements in retirement preparedness, there continues to be wide disparities between employees in the lowest and highest financial wellness levels, driven by differences in financial behavior. This disparity between employees at different sides of the financial wellness range may be influenced by differences in age and income, but improving behavior is the key to improving financial wellness. Certain employees face high or overwhelming financial stress, with urgent financial problems preventing them from preparing for retirement.

Employees with financial wellness scores of 0 to 2 are “suffering,” facing difficulties paying bills and dealing with debt. One unexpected expense could set off a series of cascading negative consequences that can lead to retirement plan loans, hardship withdrawals, and wage garnishments. Employees on the high end of financial wellness (i.e., have a financial wellness score of 9 or 10) are “secure,” exhibiting solid financial behaviors and progressing towards financial goals. Moving from one financial wellness level to the next is an incremental process that requires a gradual adoption of better financial behaviors.

Retirement Preparedness

Improvement in Financial Wellness

Employees who took a financial wellness assessment in 2016 reported progress in cash flow management, which freed up funds to apply towards other goals. Seventy-three percent of employees overall reported they had a handle on cash flow, up six percentage points since 2015. Those who reported having an emergency fund rose four percentage points. Ninety-two percent of employees reported making retirement plan contributions at work, up from 87 percent in 2015.

Retirement Preparedness

Increase In Repeat Usage

Repeat usage of workplace financial wellness programs is gaining momentum. Repeat users made up 29 percent of all users analyzed in 2016, up significantly from 16 percent in 2015, 15 percent in 2014 and six percent in 2013.

Retirement Preparedness

Financial wellness scores improved for repeat users in all major demographic groups. When broken down by age, gender, and income, the highest levels of improvement were reported by users ages 45 to 54, female, and with household incomes under $60,000.

Retirement Preparedness

Compared to new users of workplace financial wellness programs, repeat users in 2016 were nine percentage points more likely to be comfortable with their debt levels, 10 percentage points more likely to have an emergency fund, and 15 percentage points more likely to be on track for a comfortable retirement.

Retirement Preparedness

As a result of better cash and debt management, repeat users reported lower levels of financial stress. In particular, repeat users reported a seven-point lower level of “unmanageable” financial stress, which is financial stress reported at high or overwhelming levels.

Retirement Preparedness

Key Areas Of Improvement Of Repeat Users

Repeat users showed significant improvement in key areas of financial wellness, along with an overall improvement of nearly 23 percent in their average financial wellness score from their initial assessment to their most recent assessment:

Retirement Preparedness

Best Practices To Drive Repeat Usage

The majority of employers represented in our sample use a variety of techniques to drive employee engagement in their workplace financial wellness program, including:

  • Marketing their financial wellness program as an employer-paid employee benefit
  • Positioning financial wellness as a key component of an overall wellness program
  • Offering wellness incentives to participate
  • Offering unlimited one-on-one financial consultations via phone, in-person, or both
  • Marketing the financial wellness program as part of other benefits communications, such as displaying information prominently on the internal employee benefits site and reminding employees during open enrollment or benefits changes that coaching is available

Retirement Preparedness

Improvement in Retirement Preparedness

Twenty-seven percent of employees that took a financial wellness assessment in 2016 reported being on track for retirement, up from 19 percent in 2015. Despite this improvement, employees across the board aren’t saving enough to meet retirement needs. Ninety-two percent reported participating in their employer-sponsored retirement plan, but only 77 percent are contributing enough to earn the full employer match. The problem of retirement under-preparedness continues to be systemic, with insufficient percentages of virtually all demographic groups saying they are on track for a comfortable retirement.

Retirement Preparedness

Retirement Projections Increased

Improvement was helped in part by a larger percentage of employees having run a retirement projection. Forty-nine percent of employees reported taking this step, up from 35 percent a year earlier. This progress was influenced by repeat users, 38 percent of whom reported having run a retirement projection and finding they were on target.

Retirement Preparedness

Employees who are not prepared for retirement fall into two categories:

  1. The unknowns – employees who don’t know if they are saving enough to retire comfortably, don’t have the resources, or don’t know where to begin.
  2. The underfunded – employees who have taken some initial steps to plan for retirement, such as running a retirement projection; they realize they are not saving enough for retirement but can’t or aren’t likely to due to other competing priorities.

Six In 10 “unknowns” Gain Confidence With A Retirement Projection

The percentage of employees that reported running a retirement projection increased 14 percentage points to 49 percent in 2016. Nearly six

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