Retirement nightmares now focus on the real and chilling fear of outliving your assets
New research from Financial Finesse identifies a national malaise about financially surviving retirement, and many of us our literally losing sleep over it. Read the 2016 Financial Stress report. Reprinted with permissions. Visit Financial Finesse.
Money continues to keep American workers up at night.
Financial stress levels are relatively unchanged for most employee demographics since 2014. Most employees continue to worry about their personal finances, with 25 percent of employees that took a financial wellness assessment in 2015 indicating high or overwhelming financial stress.
About one-third were assessed as vulnerable to living beyond their means and having serious debt.
It is no surprise that money was reported as one of the top sources of significant stress, according to this year’s Stress in America™ survey commissioned by the American Psychological Association (APA) i.
With 85 percent of employees reporting at least some level of financial stress employers should be on the alert that their workforce could be losing sleep due to worrying about money.
Based on a recent survey conducted by Creditcards.com, 6 in 10 adults lose sleep over at least one financial problem, with women tending to worry more and sleep lessii.
A sleep-deprivation crisis
Arianna Huffington believes we are in the midst of a sleep deprivation crisis. Tired workers have less focus, come to work grumpy, and are easily distracted.
That costs workers on average 11.3 days of productivity a year, according to the America Insomnia Surveyiii. Due to the potential risk of lost productivity, EBN looks ahead to corporate sleep programs being the next frontier of workplace wellnessiv.
To help employees sleep better at night, a focus on financial wellness can be part of the solution.Women are more likely than men to report feeling overwhelming financial stress. Even in combination with age, income, and the presence of minor children, gender played a major role in the level of stress reported by users.
As we noted in last year’s Financial Stress Report, mothers with minor children living in households with income below $60,000 (9 percent of the total sample) are the most financially stressed. According to our findings:
- Nine percent of Millennial women under age 30 reported overwhelming financial stress compared to 5 percent of their male counterparts.
- Lower-income males (making under $60,000 a year) were more likely than lower-income females to report no financial stress, at 13 percent versus 9 percent.
- Women’s stress levels seem to be impacted by the presence of minor children in the household. Eleven percent of women with minor children reported having overwhelming levels of stress, compared to only 6 percent without children. Men’s stress levels seem to not be significantly impacted by the presence of minor children, as only 6 percent of men with children in their household reported overwhelming levels of financial stress, compared to 4 percent of men without children.
2015 Breakdown by Age/Gender
Pre-retirees (age 55+) also have financial stress levels that are lower than the average, with 23 percent indicating they have no financial stress—a good place to be heading into retirement.
However, there are still a significant percentage of pre-retirees who are heading into retirement with uncomfortable levels of debt (28 percent), noemergency savings (33 percent), and uncertainty about their retirement preparedness (50 percent).
2015 Breakdown by Income/Gender
While increased family income is correlated with a reduction in financial stress, it is noteworthy that employees from higher-income households still experience financial stress, although they are not as likely to have high or overwhelming financial stress. Seventy-seven percent of men and 83 percent of women in households making $100,000 or more have financial stress, with 13 percent and 17 percent, respectively, having high or overwhelming levels of financial stress.
2015 Breakdown by Family Structure/Gender
Ninety-one percent of women with minor children say they have financial stress, with 36 percent saying their financial stress levels are high or overwhelming.
2015 Breakdown by Marital Status/Gender
High levels of financial stress can put a strain on couples. With 22 percent of married employees reporting high or overwhelming financial stress, this could be a huge obstacle to the success of their marriage. The APA found that 31 percent of spouses and partners say that money is a major source of conflict in their relationshipv.
Financial stress usually becomes magnified as a marriage unravels, and the International Foundation of Employee Benefit Plans (IFEBP) recently mentioned the research of Jay Zagorsky, which found that wealth begins falling four years before a divorce and can reduce a person’s net worth by 77 percentvi, vii. From an employer’s perspective, this points to the possibility of administering a qualified domestic relations order (QDRO)on the retirement plan or child support garnishments on payroll.
The Pervasive Effects of Financial Stress
Financial stress exacts a heavy toll on employees’ health, personal relationships and productivity. While most employees (85 percent) have some level of financial stress, this is not too surprising given the level of financial complexity in 21st century America.
So many financial decisions require a balance of financial literacy, self control and making the best possible decision given limited information. Like most Americans, employees who initially participate in financial wellness programs often feel underprepared to decipher the financial terminology that comes with their health insurance, mortgage or investment choices.
Manageable vs. Unmanageable Stress
Having some financial stress is annoying or frustrating, but it’s manageable. The highest risk comes when financial stress moves from just frustrating to unmanageable.
Unmanageable stress levels reflect a sense that one’s finances are out of control, and that there is little hope for turning things around. Generally these are the employees who are living paycheck to paycheck, with expenses exceeding their incomes and/or with large debt balances and no emergency savings. One unexpected and expensive event, such as a period of unemployment, a medical emergency, an accident, a death or divorce can devastate personal finances for those who are unprepared.
Depression, Overeating and Smoking
Financial stress can impact marriages and sleep, and it can also negatively impact mental and physical health. According to a poll by AP-AOL, 29 percent of people with high levels of stress from debt have suffered from severe anxiety, and 23 percent have suffered from severe depression.
Among people with low levels of stress from debt, only 4 percent have suffered from these conditionsviii. Stress hormones increase overeatingix which can lead to obesity and related health problems. Another study showed that financial stress increased the risk of substance abuse. All of these issues affect both employees and their quality of life, and also employers in terms of presenteeism, absenteeism and increased healthcare costs.
Financial stress also affects smoking rates. Ex-smokers who had more than average levels of financial stress were significantly more likely to relapse, and current smokers who experienced above-average financial stress were significantly less likely to quitx.
Financial stress contributes to health and heart problems which can be dangerous for employees. Per the AP-AOL poll, 44 percent of people with high levels of stress from debt have suffered from migraines, 27 percent have suffered from ulcers or digestive issues, and 33 percent have suffered from hypertension.
Those with high levels of stress from debt are also twice as likely as those with low levels of stress from debt tto have a heart attack. Other research shows maintaining an emergency fund can significantly reduce your odds of developing heart disease—more so if you don’t live alonexi. These are high costs for employees, and for employers, as negative health outcomes increase the costs of employer-paid health insurance and contribute to absenteeism and reduced productivity.
Financial Coaching Reduces Financial Stress
Without intervention, employees can remain stuck in bad financial patterns, or even make problems worse, unable to tackle thorny financial issues like high debt.
Financial wellness programs that incorporate direct coaching for behavioral change have shown that financial coaching assists employees in getting unstuck. Employees who have had five or more interactions on the phone or in person with a CERTIFIED FINANCIAL PLANNER™ professional have shown substantial progressxii. Those repeat interactions with a financial coach help an employee get unstuck by focusing on taking small steps, one at a time, and helping the stressed employee build a pattern of success. The coach holds the employee accountable while offering motivation and encouragement through the process of creating effective new money management habits.
Read the entire report here.
