It's time to rethink retirement. But it's also time to rethink employee financial wellness.
Advancements in human health have extended life expectancies, making effective retirement planning increasingly crucial. Larry Fink, Chairman and CEO of BlackRock, recently underscored this issue in his annual shareholder letter, highlighting the pressing need for Americans to rethink their approach to retirement amidst an aging population.
Fink's message resonates deeply with the current reality: people are living longer without adequate financial preparation, leading to an increasing likelihood of many unable to enjoy their extended years. A GOBankingRates survey of more than 1,000 adults found that 28% of people have nothing saved for their future. The survey revealed that 39% of respondents don't contribute to a retirement fund, while another 30% don't think they'll ever be able to retire.
The pressure of various social safety nets, including Social Security, amplifies the urgency, prompting Fink to further advocate for increased investment in capital markets to ensure a secure retirement. While investing in capital markets is a proven strategy, it represents only one piece of the puzzle. A critical aspect often overlooked is the connection between financial well-being and workplace performance.
The State of Employee Financial Well-Being
As shared through Morgan Stanley and PWC research, financial stress can significantly impact employees' productivity, engagement, and overall health. A 2023 study by Morgan Stanley revealed that 66% of workers in the U.S. admitted that financial anxiety was impacting their work and personal lives.
Furthermore, a 2023 PwC study found that 57% of employees identified finances as the primary driver of stress in their lives, with 47% of employees earning $100,000 or more citing finances as the primary concern. The repercussions of financial stress manifest in various aspects of employee's lives. In this same study, these worries hurt employees:
- Self-esteem (50% of respondents)
- Mental health (55%)
- Sleep (56%)
- Physical health (44%)
- Relationships at home (40%)
The toll of financial worries can be profound, leading to increased (and long-term) chronic stress, which can lead to a variety of ailments, including an increased risk of heart disease, as mentioned by the American Psychological Association (APA).
The Opportunity for CEOs and Organizations
While more companies are starting to invest in their physical and mental health programs, the emphasis on financial wellness and literacy remains limited. Research from a 2023 Transamerica Institute report found that 77% of workers viewed financial wellness programs as an important benefit, yet only 28% of employers currently offered them. Also, the study found that employees spend an average of eight hours a week dealing with financial issues, four occurring at work.
The financial benefits for organizations that commit to employee financial well-being are substantial. A 2019 survey by Salary Finance found that poor financial wellness can account for 11 to 14% of an employer's payroll expense, further highlighting the direct impact on the company's bottom line. Addressing this gap can further enhance employee satisfaction, retention, and productivity.
Financial Well-Being Programs: A Win-Win Opportunity For Everyone
Implementing comprehensive financial wellness programs would impact individuals (and their families) and the organization. Research from Sofi indicates the mutual benefit of financial wellness and how it could:
- Drive an increase in worker productivity (86%)
- Increase desire to stay with their employer (86%)
- Improve job satisfaction and engagement at work (84%)
- Improve the ability to focus (84%)
- Improve mental health (84%)
- Improve physical health (80%)
Research also suggests that implementing a financial wellness program can lead to an 18.8% increase in employee retention among salary and hourly employees. While there isn't a one-size-fits-all strategy, leaders can start integrating a financial wellness culture with the following steps:
- Assess employee needs through surveys and focus groups
- Communicate existing options and support
- Offer various financial education programs
- Offer coaching and counseling to help break bad financial habits
- Incentivize and entice for added participation
- Monitor and evaluate effectiveness
By prioritizing employee financial well-being, organizations help each team member build a more secure future for themselves and their families. By investing in your employees' financial health, you're creating a more resilient, happier, healthier, and engaged workforce and positioning your organization for long-term success.
