Can 401k Financial Wellness be Effectively Graded?

It examined behaviors, including savings rate and loan history

401k, financial wellness, FidelityThey developed a financial wellness score.

Interesting idea, and Boston-based investment big Fidelity Investments is going to try. It’s out with its Fidelity Financial Wellness Score “for people to measure their financial health, identify the areas where they need help and how they can improve.”

Fidelity’s Financial Wellness Score is based on a scale from 0 to 100, where 0 represents extreme financial distress and 100 indicates the maximum level of financial wellness.

To assess how financially well workers are today, Fidelity conducted a survey of more than 6,000 people to understand how they are doing in each of the financial wellness domains. Fidelity also examined the behaviors of the respondents within their retirement plan including savings rate and loan history.

Applying the Fidelity Financial Wellness Score, the results reveal:

  • 14 percent of those surveyed are financially “excellent” (a score between 81 and 100),
  • 37 percent are “good” (a score between 61 and 80),
  • 33 percent “fair” (a score between 41 and 60) and
  • 16 percent “need attention” (a score between 0 and 40). Here are the observed attributes of respondents in each category.

The survey also reveals:

  • Generation X is the most financially stressed: More than half of GenXers (52 percent) feel neutral or negative about their debt situation. By comparison, nearly two-thirds of Boomers (65 percent) feel like their debt is manageable.
  • For many, money brings happiness: 57 percent of those surveyed said they could not be happy unless they are financially secure. Surprisingly, millennials are more likely to feel this way than other generations with 66 percent agreeing with the statement.
  • People are most concerned about debt: 30 percent agree strongly that their household has too much debt and 11 percent say they think about debt “all the time.”
  • Financial stress hits home for women: Women are twice as likely to report feeling worried or sick about their financial situation as men.

“To enhance our Financial Wellness program, Fidelity developed a way to measure Financial Wellness and offer a clear way to assess if a person is financially well. The score is based on what we believe are the four key domains of Financial Wellness: budget, debt, savings and protection, all of which are equally significant,” Jeanne Thompson, senior vice president of Thought Leadership, Fidelity Investments, said in a statement.

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