A new John Hancock Retirement report released today finds sharp declines in financial progress, with employees now twice as likely to take a negative view of their finances (42%) than a positive one (20%).
The ninth annual survey of John Hancock Retirement’s retirement plan participants found nearly 4 in 10 employees (38%) think they’ll have to retire later than planned, a significant increase from the 24% who said they’d need to delay retirement in last year’s report.
Employees’ financial situations and mental health are bearing the brunt of the burden of a year where economic uncertainty and inflation have upended saving and spending habits. The financial worries are coupled with a noteworthy decline in participants’ financial situations to below prepandemic levels.
With the market declines across asset classes in 2022 and the potential for a recession dominating news coverage, 70% of respondents say they’re worried a great deal about the economy. The most frequently cited issues were concerns about the impact of inflation on the cost of living, general economic conditions, and rising interest rates.
Nearly all respondents have taken note of rising costs in the past six months, with the vast majority reporting increased spending on groceries, household basics, gas, and monthly bill payments.
“Coming out of the pandemic, we were hopeful to see continued improvements in financial well-being, but our results showed how quickly an uncertain economy can take those gains away.”
Aimee DeCamillo
The results of John Hancock Retirement’s stress, finances, and well-being report found that as household budgets are strained by inflation, one in three respondents say it’s currently challenging for them to save money and 1 in 5 have dipped into their savings to be able to afford day-to-day necessities.
“Coming out of the pandemic, we were hopeful to see continued improvements in financial well-being, but our results showed how quickly an uncertain economy can take those gains away,” said Aimee DeCamillo, head of Global Retirement, Manulife Investment Management. “We did see some resilience, however—despite their financial strain, more than 70% of respondents said they’ll be focused on growing, maintaining, or investing their savings in the coming months, with almost half citing paying off debt and planning for retirement as short-term goals.”
Beyond concerns about economic conditions, in general, more than half (58%) of workers are significantly worried about one or more aspects of their personal finances, with some of the frequently cited being saving too little for retirement, credit card debt, and building emergency savings.
401(k) plan engagement, wellness programs are keys
Survey results, in combination with John Hancock Retirement’s participant data, found that workers who engage with their retirement plans digitally—by logging in to the plan website or opening email communications from their plan—are more likely to report that they’re in good financial shape and on track for retirement than their less-engaged peers.
The plan participant data shows that employers that are able to engage their employees regularly with relevant, timely information may be helping them take financial action, including increasing their retirement contribution rates.
In addition, employees themselves say that financial wellness programs reduce their financial stress (82%), make them more likely to stay with their employer (78%), and make them more productive (70%).
However, only 3 in 10 say their employer offers a wellness program, while 2 in 5 (41%) are unsure. The current economic conditions represent a clear opportunity for employers to either launch programs for their employees or make a more concerted effort to educate them about their existing programs.
“While offering financial wellness tools with an engaging, personalized communication plan is something positive employers can do for their bottom line, we like to emphasize that it also can be a significantly positive thing to do for their employees,” said Aimee DeCamillo, head of Global Retirement, Manulife Investment Management.
Generational divide in stress
Overall, mental health has seen a positive shift since last year, with 65% describing their mental health as good compared with 53% previously. Despite this improvement, 7 in 10 say the challenging economic backdrop has had some impact on their mental well-being, with 16% of those saying it’s had a major impact.
An even closer look at the data shows stark generational divides in mental well-being, with three-quarters (76%) of Boomers saying their mental health is good/very good compared with less than half (46%) of Millennials who say the same.
Employees’ mental health issues are showing up on the job, with 43% reporting that their mental health has interfered with their ability to work in the past year, with Millennials (72%) the most likely to experience this problem. Nearly half (44%) of Millennials say they worry about their personal finances often while at work, with more than half of them (54%) saying they’d be more productive if they were less worried.
Employee stress takes a toll on companies’ bottom lines as well, with financial stress costing employers almost $2,000 ($1,962) per employee in lost productivity and absenteeism last year.
“The levels of stress and worry in the report are troubling, particularly among Millennials, especially given the uncertain economic times we are experiencing. The good news is that it is clear that supporting employees through financial wellness programs and working to get them engaged in their personal finance benefits is likely to help boost overall employee satisfaction, retention, and productivity,” said Wayne Park, CEO, John Hancock Retirement.
More findings from the report
• Four in 5 (80%) employees say they’re unlikely to work for a company that doesn’t offer a retirement plan.
• Fewer than 1 in 3 (31%) respondents have a formal retirement plan, and only 1 in 3 (33%) have met with a financial advisor in the past year.
• While roughly half (53%) of respondents feel their current level of debt is problematic, it appears manageable for now as only 14% consider it a major problem and 61% say they’ve been able to make their payments without difficulties.
• Nine in 10 employees report that learning about sources of retirement income, projections of income, and connecting with an advisor would encourage them to do more to prepare for retirement.
SEE ALSO:
• John Hancock Retirement Names Industry Veteran Wayne Park as CEO
• Employers Can Lessen Workforce Stress and Strains: Mercer
• As Inflation Continues, Workers Look for ‘Care’ in Employee Benefits
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.