As the Fed warns of increased interest rates heading into 2023 and individuals become more fearful of their finances in the new year, more workers are craving financial stability and support from their employers.
A new survey from Betterment polled 1,000 full-time U.S. employees, finding that worker’s financial wellness and sense of security is on a downward trend. Unsurprisingly, the study finds inflation was the main culprit when it came to employees’ financial anxieties, as 64% of respondents say they have faced higher costs-of-living.
As a result, 40% of employees rated themselves as financially stable—a nine percentage point drop from last year—and only 59% of employees currently have an emergency fund, leaving close to half of workers without a safety net.
The rising cost-of-living factors and lack of emergency savings have caused some employees to dip into their retirement savings for short-term expenses. Over a quarter (28%) said they tapped into their retirement account when they were strapped for funds.
This lack of security has soared the mental toll on employees, with 71% who say their finances have caused anxiety, and 88% who agree that inflation and cost-of-living increases have risen their financial anxiety. Women, who tend to be forced out of their careers despite living longer, reported being more stress than men. Seventy-seven percent of women say their finances have made them anxious, vs. 63% of men.
Other key stressors included credit card debt, stock market volatility, rent increases and new home costs.
Student loan borrowers face higher levels of anxiety
This past year has seen an amplified focus on student loan debt. From President Joe Biden unveiling his federal student debt forgiveness program in August and the lawsuits and subsequent halt that came following, to another student loan extension into 2023, student loan borrowers have faced mountains of anxiety when it came to their finances.
Of those who borrowed student loans, Betterment at Work found 81% say they are anxious over their finances, vs. 66% of workers without debt. Additionally, almost half (44%) of employees said they do not feel ready to resume payments when the moratorium lifts next year, and women were even less likely to feel prepared than men.
In conjunction with rising inflation and the pressure to pay back their loans, 42% of employees said they have cut down on dining and entertainment, 32% have skipped vacation this year, and 24% have lowered the amount they invest. On the topic of investing, most student debt borrowers (67%) said they believe student debt has impacted their ability to save for retirement.
Meanwhile, 27% of employees surveyed said they are currently putting money towards a college fund—despite less than half who are not using a 529 plan to save.
Employers can do more to look out for workers
The Betterment for Work study calls out plan sponsors who are not doing enough to support their workers through financial stress, finding that while a 401k plan and an employer match are two of the most highly sought-after financial benefits, only 52% of employees surveyed have access to a 401k. The number drops even more for small business workers—to 39%.
According to the research, 68%of employees indicated that financial wellness benefits are more important to them now than they were a year ago. Other highly desired benefits include access to an FSA and HSA, an employer-sponsored emergency fund, and student loan offerings.
Yet, just under half (45%) feel that their employer is committed to supporting their financial wellness, showing there’s room for employers to provide value and demonstrate their support.
“The shifting economic tides have impacted employees and employers in different ways. Many workers are struggling with new challenges and financial anxiety, meaning financial wellness benefits have become more important than ever. Meanwhile, companies are focused on sustainable growth and investing intentionally in their employees,” said Kristen Carlisle, general manager of Betterment at Work, in a statement. “This presents an opportunity for employers to reexamine their benefits packages and gauge whether their current offerings are truly meeting the evolving needs of employees. A great financial wellness package doesn’t need to provide every benefit under the sun, but rather, a curated selection of the benefits that will make the most impact.”
Additional findings from the study can be found here.
SEE ALSO:
- Institutional Investors Predict ‘Inevitable’ Recession for 2023
- 2022 Social Security COLA Falling Well Short of Inflation
- 4 Inflation-Fighting Considerations in 401k Plans
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
