Employees are prioritizing short-term financial needs over retirement savings, according to findings from Bank of America’s 13th annual Workplace Benefits Report, released today.
The report found fewer employees are prioritizing long-term retirement savings (31%, down from 45% in 2022) as a growing number are focusing on short-term financial needs, including paying off credit card debt (16% vs. 11% in 2022) and saving for the unexpected (13% vs. 8% in 2022).
This is the first year in the annual report’s 13-year history that women did not rank saving for retirement as their top financial goal, replaced by paying off credit card debt.
Nevertheless, one in four women (25%) reported taking action to increase their retirement saving in the last 3 to 6 months, compared to 18% of men. When it comes to being somewhat or extremely confident they are on track to meet their retirement goals, 68% of men said they were compared to 55% of women.
BofA’s report, “The Transforming Workplace” (PDF), also revealed that two-thirds (67%) of employees believe the cost of living is outpacing growth in their salary or wages, compared to 58% in February 2022. Over the last year, the impact of inflation and economic uncertainty has contributed to increased financial stress and to financial wellness among employees dropping to 42%, the lowest rate since this research began in 2010. Despite which, more than half (56%) of employees remain cautiously optimistic about their financial well-being over the next 2 to 3 years.
“American workers continue to feel stressed about their finances and are concerned about keeping up with the cost of living,” said Lorna Sabbia, Head of Retirement and Personal Wealth Solutions at Bank of America. “Companies who show a sense of urgency for their workforce by offering financial wellness programs and resources which support employees’ immediate needs and overall well-being will continue to stand out as employers’ of choice.”
Employees continue to look for support from their employers, with most employees (76%) and employers (96%) agreeing that employers are responsible for employee financial wellness. However, only 2 in 5 employers currently offer financial wellness programs.
Other emerging trends from the study include:
- Half of employees are not actively saving for future health care costs. Nearly half of employees (45%) say they are not saving specifically for health care. Additionally, confidence in managing health care costs has decreased (16% vs. 27% in 2022), and only 7% plan to start contributing to an HSA to help address the future cost of health care.
- Women are feeling the weight of financial stress. Only 38% of women feel financially well in 2023, a decrease from 55% in 2022, and a five-year low. 54% feel that they won’t be able to make ends meet due to inflation, compared to 32% of men; and 39% have had to look for additional employment due to rising costs, compared to 17% of men.
- Feelings of financial wellness also vary by ethnicity and location. 61% of Asian employees rate their financial wellness as good or excellent, followed by White/Caucasian (44%), Hispanic/Latinx (40%) and Black/African American (35%). Additionally, less than 1-in-4 of employees living in urban areas feel prepared for retirement, compared to 32% of suburban employees and 43% of rural employees.
The evolving workplace
While employers report lower employee attrition rates this year compared to 2022, staffing continues to be a challenge. Nearly one-third of employees (32%) say they switched jobs or considered leaving their company in the past year, with the top reasons including burnout (53%), size of pay increases (44%), and work-life balance (41%).
More than half of employers currently have an in-person work model (55%), followed by hybrid/mix (39%) and fully remote (6%) models. However, in the next three years, more employers plan to shift to hybrid/mix (47%) and remote (17%) models, while fewer (36%) plan to maintain a fully in-person model.
First launched in 2011, the annual Workplace Benefits Report examines trends related to workplace financial benefits and wellness programs. Based on nationwide surveys of more than 1,300 employees and nearly 800 employers conducted during the first half of this year, the 2023 Report unveiled trends across employee retirement preparedness and financial well-being, the impact of caregiving on the workforce, and the state of the workplace.
More findings, including actionable steps for employers, are available in the Bank of America 2023 Workplace Benefits Report (PDF).
SEE ALSO:
• Participants Worried About Higher Taxes on 401(k)s
• Exploring the Very Real Workplace Financial Wellness Gender Gap
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.