The media typically paints a relatively bleak picture regarding retirement readiness for many Americans today. Conflicting financial priorities make saving for retirement increasingly difficult with national savings rates well below what would generally be considered optimal.
We believe one potential way to get more Americans on the path to financial success would be an increased presence of employers offering financial wellness tools and solutions to employees. A recent online survey conducted by the Defined Contribution Institutional Investment Association (DCIIA) Retirement Research Center (RRC), suggests that not only do certain types of employees face notable barriers to receiving financial help—in particular younger individuals with lower incomes—but employers have the potential to directly address may of the key barriers noted to getting help.
While some companies may not feel it’s their responsibility to help employees achieve better financial outcomes, there are likely a variety of implicit and explicit benefits associated with doing so, and therefore something each company should at least considering pursuing.
Survey addresses barriers
The DCIIA Retirement Research Center survey, fielded from Feb. 19 to Feb. 25, 2023, with 2,500 respondents, targeted workers actively participating in a company sponsored defined contribution plan.
This particular article is focused on the barriers to financial help. The table below includes information about the percentage of respondents who note there were “no barriers” from getting help with planning, broken out by household income and respondent age.
We can see there are notable age and income effects, where younger respondents with lower income levels are much more likely to report some type of barrier with respect to getting help. For example, only 21% of respondents who were under the age of 30 with households less than $55,000 reported no barriers while 67% of respondents over the age of 60 and making over $150,000 reported no barriers.
The next chart provides context about the frequency of the respective barrier being noted by respondent age group.
Frequency of Reporting Barrier to Help Planning by Age Group
Source: DCIIA RRC Survey, fielded Feb 19-25, 2023
The most commonly cited barrier to financial help is the perception of it being “too expensive.” The next two are “not sure where to look” and “not enough money saved.” These three barriers are all things an employer-provided solution can directly address by marketing the solution to employees and offering it at low or no cost to employees, through either subsidizing the cost or using scale to reduce price.
There is a perception that employers should help support employees in issues relating to financial wellness. For example, the table below provides context about what percentage of respondents, by age group, either somewhat agree or strongly agree with the following question: “My employer should play a role in supporting my financial wellness by providing tools and services to help me.”
The responses are grouped by those respondents noting a barrier to help and those who are not.
The percentage agreeing with the statement increases by age and is higher among respondents reporting a barrier to help. In other words, people who would benefit the most from financial help are those most likely to think the employer should be offering it.
One strategy that may improve employee interest and allay concerns regarding information sharing with using employer-provided tools is to disclose to participants who use them that the data is not shared with any third party or especially the employer. This was noted in a joint DCIIA RRC/SPARK research piece and anecdotally, one plan sponsor experienced a significant increase and use of wellness tools when the employer sent communications to participants specifically noting that the employer would not receive, or have access to, any of the employee information.
In summary, it appears there is a large portion of American workers today who could benefit from additional financial assistance and employers have an opportunity to play an important role in seeing they do!
MORE FROM DAVID BLANCHETT:
• What to Consider When Contemplating an Annuity for a Defined Contribution Plan
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