In The Worksite

Being Retirement Ready

How the emerging notion of financial wellness is gaining greater traction

by Sharon Scanlon

Sharon Scanlon is the Senior Vice President of Customer Experience (CX), Producer Solutions and Retirement Plan Services Operations at Lincoln Financial Group and serves as Chief Marketing Officer for Workplace Solutions, which encompasses two of Lincoln Financial Group’s core businesses — Group Benefits and Retirement Plan Services. In addition, Scanlon oversees Retirement Plan Services Operations, CX operations for Life Insurance, Annuity and Producer Solutions, and leads the operational teams that support producer onboarding, licensing, appointment, compensation and selling agreements for Life and Annuity.

The past two years have changed how businesses, the economy and society operates — no one was left unaffected by the pandemic. It’s no surprise that as the market fluctuated and unemployment grew, Americans began taking a closer look at their finances and questioning their financial readiness in an emergency situation.

Now, research shows that employees are poised to make significant changes to their financial behaviors. According to Lincoln Financial Group’s 2021 Retirement Power® study*, nearly eight in 10 U.S. workers have been motivated to reevaluate their finances, career and retirement as a result of the pandemic. Workers are placing a greater emphasis on what is important in life and helping ensure they are financially prepared for the future.

People participating in an employer-sponsored retirement plan are especially interested in improving their finances — more than two out of three (69%) say they would like to save more in their retirement plan. And yet participants are not the only people looking to invest in the future; nearly half of those who have access to a workplace retirement plan, but do not currently participate, would like to start contributing this year.

This heightened interest in improving retirement readiness offers employers a significant opportunity to present employees with tools and resources to help secure their financial future. Offering personalized tools and retirement plan options can also lead to an increase in employee satisfaction and a potential decrease in attrition, a common concern among employers as record numbers of workers reevaluate their jobs in today’s post-COVID environment.

Employers interested in boosting their employees’ financial confidence should focus on three core areas: financial wellness, education and retirement income security.

Focus on Financial Wellness

As we move forward, employees are looking more and more to their employers for information and guidance on improving their finances. And while eight in 10 workers would like education on how to manage competing financial priorities, only 16% of workers report being offered help with understanding and finding that balance.[1] Offering wellness resources, along with a well-rounded benefits package, sends a clear and deliberate message that employers care about employees both inside and outside of the office.

Balancing financial priorities is one of the main causes of stress among workers, with an overwhelming 90% of full-time U.S. employees saying they are concerned about some aspect of financial wellness.[2] This heightened financial stress can make it difficult for workers to balance the needs of today with saving for the future.

Those who have felt stressed in the past six months say it has affected their mental and physical health, their performance at work and their ability to improve personal finances and set long-term goals. Stress levels also correlate to key retirement outcomes. The research shows that highly stressed participants have lower contributions, fewer plan assets and less confidence than those who are not as stressed.

Offering financial wellness resources can help — in fact, 86% of employees who use financial wellness tools say they see a positive impact as a result. Seeing a holistic view of their financial health, including spending, saving, debt and protection, can also help employees better plan for and achieve financial goals.

Good financial health can be the foundation for retirement security and confidence. When employees improve their financial wellness, they’re able to better manage everyday expenses, reducing stress levels and allowing them the confidence to plan ahead for the future.

Emphasis on Education

Offering financial wellness resources is just the first step — it’s equally important for employers to communicate how the tools and resources offered can help employees achieve the retirement they envision.

Retirement planning can be complex — it’s hard enough to predict how much you’ll need and how much to save, but you also have to decide which accounts to contribute to and where to invest. It’s important for employers to offer simple, relevant and personalized information for employees, as eight in 10 employees say there is more they want to understand when it comes to their retirement plans. Offering the right tools, like one-on-one retirement consultations, retirement income projections and calculators, can help employees understand how to make better decisions when it comes to saving.

It’s difficult for participants to look at their balance and know how that will translate to monthly income when they need it...

Research shows that education relating to an employee’s personal situation, with real-life numbers, motivates them to act: 78% of employees say they would be motivated to save more for retirement (or start saving) if they felt more confident about saving and investing decisions. Education not only helps employees make sound financial decisions, it drives overall confidence and engagement. Savers who use employer-provided financial resources are more than twice as likely to have increased the amount they contribute to their retirement plan in the past year compared to those who have not used financial wellness resources.

Income projections also correlate to higher confidence. More than half of those who received income projections said it was very useful in helping them understand if they’re on track to retire when they want, have enough money to maintain the lifestyle they want in retirement and be able to convert their savings into income that will last through the rest of their life.
It’s difficult for participants to look at their balance and know how that will translate to monthly income when they need it.

However, income projections leverage their balance and current contributions to provide participants with a clearer view and make adjustments to reach their goals if needed. Having a better view of their financial standing leads to a more knowledgeable, engaged and productive workforce.

Support a Safe and Secure Retirement

After two years filled with the unexpected, Americans are looking for something they can rely on. Many participants watched their retirement savings fall when the stock market dropped, leading to concerns about financial readiness. The volatility of the market, paired with rising unemployment, has resulted in an increased interest in guaranteed retirement income products.

In fact, the No. 1 investment topic savers want to learn more about is how to put money in an investment that provides guaranteed lifetime income. And research shows they’re ready to act: 72% of employees are interested in what guaranteed income products can mean for their financial futures and 46% of participants say they would increase their contribution if guaranteed income, especially as part of a target-date fund, was offered.

The importance of guaranteed income increases with each generation as the availability of traditional pensions and reliance on Social Security continues to decrease. While 87% of Baby Boomers are looking to Social Security for retirement income and 41% of them expect pension plans to provide income as well, just 21% of Millennials believe they’ll be able to rely on a pension and only half think Social Security will be a source of income in retirement.[3]

Currently, more than one in three American labor force participants (35%) are Millennials, making them the largest generation in the U.S. labor force.[4] Reaching them is an essential need for employers and requires employers to offer more reliable options for retirement. Of those surveyed, 50% of Gen Z and 53% of Millennials are highly interested in an investment option within their employer-sponsored retirement plan that provides guaranteed monthly income in retirement.

Offering an in-plan lifetime income solution presents a significant opportunity to get non-savers and participants with long-time horizons engaged with the plan and can help participants look forward to retirement with confidence. It also gives savers the confidence that they won’t run out of money in retirement, a common concern among all generations.

Next Steps

As employees put the pandemic behind them, they’re ready to take action to improve their financial health and save for the future. Employers have a unique opportunity to help employees turn those good intentions into action. Yet, it’s important for employers to first understand the needs and wants of their workforce. There isn’t a single best approach for everyone. By incorporating lessons learned from the past two years, we can help workers feel more confident in their financial future and help drive positive outcomes.




*All data is from the 2021 Lincoln Retirement Power® Study unless otherwise specified. For additional details from the study, please visit Lincoln Financial Group.
[1] Employee Benefit Research Institute and Greenwald & Associates, 2020 Retirement Confidence Survey
[2] Lincoln Financial, Monthly Consumer Sentiment Tracking Study, May 2021.
[3] LIMRA Secure Retirement Institute, Retirement Income Reference Book, 4th Edition, 2019