Client Service March 22, 2017

Getting Out of Debt Top Concern for African Americans, Latinos

Debt beat out planning for retirement as the top concern for African Americans and Latinos, an analysis found.
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Sixty-eight percent of employees chose retirement planning as a top concern in 2016 making it the most often cited concern, but it was actually getting out of debt that continued to top the list of concerns for African American (76%) and Latino (65%) employees, according to Financial Finesse’s 2016 Year in Review report.

Cash and debt management concerns continue to contribute to overall lower financial wellness levels among African American and Latino employees.

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Planning for retirement was a top concern for 74% of white employees and 63% of Asian employees, compared to 50% for African Americans and 55% of Latino employees. Meanwhile, managing cash flow was a top concern for 62% of African Americans and 56% of Latinos, compared to 38% of Asians and 46% of whites.

Higher concern for debt may be contributing to financial stress as both Latino and African American employees reported higher levels of unmanageable financial stress. In 2016, 31% of African Americans and 25% of Latinos expressed unmanageable levels of financial stress, compared to 12% of Asians and 19% of whites.

All of Financial Finesse’s research is based on tracking employees’ most pressing financial concerns through their usage of the firm’s financial education service. The report uses an expanded data set based primarily on the analysis of 67,089 financial wellness assessments completed January 1, 2015, through December 31, 2016. The report can be found at https://ffinesse.box.com/v/2016-Year-in-Review-Report.
Data & Research March 22, 2017

Few Employees Report Being on Track for Retirement

However, Financial Finesse found repeat usage of employer financial wellness programs and running retirement projections incrementally improves retirement preparedness.
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Financial wellness improved for the average American employee in 2016, aided by an increase in the percentage of repeat usage of workplace financial wellness programs, according to Financial Finesse’s 2016 Year in Review report.

Repeat users in 2016 recorded higher levels of financial wellness in cash flow and debt management, retirement preparedness, and investment confidence. The average overall employee financial wellness score improved to 5.4, up from 4.7 in 2015.

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Repeat usage of workplace financial wellness programs is gaining momentum, the report notes. Repeat users made up 29% of all users analyzed in 2016, up from 16% in 2015, 15% in 2014 and 6% in 2013. Thirty-eight percent of repeat users reported they are on track for retirement versus 23% of new users. In addition, in their first assessment, 18% of repeat users said they are on track to reach their income goal in retirement. In their last assessment, 39% of repeat users said so.

The majority of employers represented in Financial Finesse’s sample use a variety of techniques to drive employee engagement in their workplace financial wellness program, including:

  • Marketing their financial wellness program as an employer-paid employee benefit;
  • Positioning financial wellness as a key component of an overall wellness program;
  • Offering wellness incentives to participate;
  • Offering unlimited one-on-one financial consultations via phone, in-person, or both; and
  • Marketing the financial wellness program as part of other benefits communications, such as displaying information prominently on the internal employee benefits site and reminding employees during open enrollment or benefits changes that coaching is available.

Twenty-seven percent of employees who took a financial wellness assessment in 2016 reported being on track for retirement, up from 19% in 2015. Despite this improvement, employees across the board aren’t saving enough to meet retirement needs. Ninety-two percent reported participating in their employer-sponsored retirement plan, but only 77% are contributing enough to earn the full employer match. The problem of retirement under-preparedness continues to be systemic, with insufficient percentages of virtually all demographic groups saying they are on track for a comfortable retirement.

By demographic, 33% of men reported being on target for their retirement goals, and 25% of women reported being on target. Twenty-two percent of employees younger than 30 said they are on track for retirement; one-quarter of those ages 30 to 44 are on track; 29% of employees ages 45 to 54 reported being on track; and 36% of those ages 55 and older said the same.

NEXT: Retirement projections, and differences between low and high financial wellness levels

Improvement in the number of employees bring on track for retirement was helped in part by a larger percentage of employees having run a retirement projection. Forty-nine percent of employees reported taking this step, up from 35% a year earlier. According to Financial Finesse, this progress was influenced by repeat users, 38% of whom reported having run a retirement projection and finding they were on target. Nearly six in ten (57%) employees who make up this increased percentage report being on track to retire comfortably. The remaining four in 10 (43%) discovered they were not on track, thus allowing them to take steps to save more or adjust their retirement income assumptions.

The increase in retirement projections may be supported by users who repeatedly engage in their financial wellness program or who interact regularly with a financial coach. Repeat users were 12 percentage points more likely to have run a retirement projection than new users (58% versus 46%).

Financial Finesse’s analysis found employees with the lowest financial wellness levels (0 to 2) are more likely to be age 44 and younger, women, and have incomes lower than $60,000 per year. However, one in ten employees who is struggling is age 55 and older, and 14% have household incomes exceeding $100,000 per year. These employees tend to live paycheck to paycheck without emergency savings to handle an unexpected expense. Forty-one percent report having taken a retirement plan loan or hardship withdrawal, compared to 29% of employees overall.

By contrast, employees with the highest financial wellness levels (9 to 10) are more likely to be age 45 and older, men, and have household incomes greater than $100,000. Employees in this category have excellent financial habits, with 100% reporting they have a handle on cash flow, and 97% indicating they have an emergency fund. One-hundred percent report contributing to their retirement plan, and 92% are confident they are on track to retire comfortably.

All of Financial Finesse’s research is based on tracking employees’ most pressing financial concerns through their usage of the firm’s financial education service. The report uses an expanded data set based primarily on the analysis of 67,089 financial wellness assessments completed January 1, 2015, through December 31, 2016. The report can be found at https://ffinesse.box.com/v/2016-Year-in-Review-Report.

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