Financial wellness programs growing, yet employee awareness remains low
Workers continue to be concerned about their financial health and 83% admit that their workplace financial benefits are critical to their financial security.
The Bank of America Merrill Lynch Workplace Benefits Report finds that six in 10 retirement plan participants are stressed out about their current financial situation, up from just 50% two years ago.
“That’s a material change,” says Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America Merrill Lynch. “When you take a step back, that’s a very negative tone and we can’t forget these are people who have jobs and have benefit plans at work. I can only imagine people less fortunate.”
And even though participants are stressed about their current finances, a high percentage of them are optimistic they have enough in savings for the long term.
“It’s almost this false sense of security we are seeing,” Sabbia says. When Bank of America digs deeper it finds unrealistic savings assumptions around rising healthcare costs and concerning long-term financial goals as they relate to retirement.
This creates an opportunity for employers to help educate plan participants about the options available to them regarding financial wellness.
The industry is seeing plan participants more willing to accept help and education from their employers, she says.
The industry is seeing plan participants more willing to accept help and education from their employers
More than half of respondents admit to needing help managing their finances, including saving for retirement and managing debt, and 69% have experienced a rise in healthcare costs over the past two years, causing them to save less for retirement, the report finds.
Nearly two-thirds say they are focusing more on retirement planning and savings and 68% realize that their workplace retirement account will be their largest or second-largest source of income in the future. Seventy percent say they have a handle on what they need to save for a secure retirement, but when asked what that figure is, 40% say less than $500,000 and 61% say less than $1 million.
Bank of America points out that $1 million in savings would produce $40,000 a year in income at a 4% drawdown rate and the average person will spend about $400,000 on healthcare over the course of their retirement.
“There seems to be an opportunity for education around health savings accounts and understanding of short-term and long-term usage,” Sabbia says.
The use of health savings accounts is growing so making sure employees know the benefits of these plans is something employers need to work at.
Fifty-three percent of employees with an HSA view it as a short-term vehicle to cover near-term health care expenses, Bank of America says, as opposed to a long-term savings vehicle. The majority of people with an HSA usually spend their entire balance within a given year.
As of 2015, nearly half of large companies had a financial wellness program in place with another 19% planning to add one within the next two years, Bank of America finds. In this year’s survey, only 36% of respondents say their employers offer a financial wellness program, underscoring communication and awareness disconnects.
The online survey was conducted by Boston Research Technologies of 1,227 employees nationwide between Oct. 27 and Nov. 11, 2015 on behalf of Bank of America Merrill Lynch. All respondents were participants in a 401(k) plan at work.