A ‘downward trend’ on retirement readinessA new survey from John Hancock Retirement reveals the weight of financial stress on workers and its impact on employers.
John Hancock Retirement today announced the results of its sixth annual Financial Stress Survey of retirement plan participants, revealing the weight of financial stress on workers and its impact on employers. The survey reports that more than half of respondents worry about personal finances at work at least once a week, causing workplace distraction and loss of productivity. This loss of productivity combined with absenteeism from financial stress has major impact on organizations, costing more than an estimated $1,900 per year, per employee, and totaling an estimated annual loss of $1 million for midsized employers and $19 million for large employers.
The survey did find that employer financial wellness programs may improve job retention, stress levels and job productivity. Seventy-seven percent of respondents find financial wellness programs important and seven in ten feel these programs have helped reduce their financial stress and increased their loyalty to their employer. While 88% of employers say they currently have or are developing a financial well-being strategy, only 20% of participants claim their employer offers anything more than a limited financial wellness program.
Financial Situations At Risk
“Our 2019 Financial Stress Survey highlights a downward trend on retirement readiness and indicates participants’ financial situations are at risk, with 36% of participants responding they are not in a good financial situation,” said Patrick Murphy, CEO, John Hancock Retirement. “Seventy-one percent of participants are worried about having financial difficulties – the most we have seen from this survey in the past six years. We must come together as recordkeepers, financial representatives, and plan sponsors to help participants plan for their future and better understand the underlying cause of financial stress and its effect on retirement savings.”
Year over year, the number one financial worry is saving for retirement, except for those with student loan debt. Higher than in previous years, as much as 51% of workers consider themselves behind schedule when it comes to saving for retirement. Lack of emergency savings is the number two financial worry among all participants, and 25% have no emergency savings at all, which is even more pronounced for Generations X, Y, and Z where almost a third are in that position. The survey also found that fewer people are taking action to help their financial situation, with only about one of four respondents having met with a financial advisor, contributed to an IRA or allocated to a health savings account.
John Hancock’s 2019 Financial Stress Survey highlighted the following:
Concerns about personal finance affects workplace productivity: Forty-nine percent of respondents feel they would be at least somewhat more productive at work if they did not worry about finances while at their jobs – up from 43% last year. This is disproportionately impacting the younger workforce; Millennials (22%) and Gen Xers (18%) are more likely than older generations (11%) to say they would be much more productive without financial worries.
Confidence decreases in ability to make financial decisions: Only 18% of respondents feel very confident in their ability to make the right financial decisions, showing a decrease over the past three years. Only about one-third consider themselves very knowledgeable about basic financial concepts, such as managing debt (33%) and budgeting (31%). This is a disadvantage for the progress of retirement saving. Fifty-seven percent of respondents agree they would do more to save for retirement if they had more knowledge on how to prioritize their financial challenges.
Increase in retirement contributions: Forty-eight percent of participants have increased contributions over the past two years. However, there is still uncertainty when it comes to knowing how much will be needed in retirement and a gap between what they think they should be saving and what is actually being put away. More concerning is that 10% aren’t saving anything at all and 25% are only saving between 1% and 5%.
Mr. Murphy added, “We recognize the potential impact that working with a financial representative and participating in a workplace financial wellness program may have on a participant’s ability to contribute more significantly to savings and stay on track for retirement. We have also identified the critical areas where participants need help planning for retirement, and are committed to bringing personalized programs to market, that help them tackle the key components of financial stress.”
Tools for financial success
John Hancock Retirement has recently enhanced its participant financial education content and tools via a new online learning management system – My Learning Center. This system tracks and rewards participant’s interaction and serves up key content on the platform’s homepage to help plan participants improve their financial literacy, assess their personal finances, and work toward retirement readiness at all life stages. Through this offering, plan participants can view their financial lives holistically and then opt into individualized goal–based action items to increase financial literacy and proactively work towards financial wellness. Plan sponsors then use the enhanced data coming from these resources to inform targeted employee education campaigns to help improve outcomes.
To see the 2019 John Hancock Financial Stress Survey white paper or learn more about John Hancock Retirement, please click here or visit https://retirement.johnhancock.com/us/en.