Debt Needs to Be Addressed in Financial Wellness Programs

A Fidelity survey has found a link between employee debt and productivity and health issues.

Health, money, work and life all play a critical role in an employee’s total well-being, according to a study from Fidelity Investments, based on responses from more than 9,000 workers and conducted in collaboration with researchers from the Stanford Center on Longevity and Cornell University.

The survey and behavioral analysis focused on the four domains of well-being, financial (debt, savings, insurance, budgeting); health (physical health, mental health, healthy behaviors); work (work/life balance, career status and opportunities, burnout); and life (personal satisfaction, sense of purpose, sources of stress, relationships) and found employees are struggling most in the financial domain, where 42% fall into the “unwell” category. Respondents were assigned a total well-being “score” for respondents within each domain of well-being—on a scale of zero to 100, an individual with a score of 61 or higher was considered “well,” while a score of 60 or below was considered “unwell.”

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The research found stress related to work and finances impacted just about all employees in the survey, regardless of age, gender or income, and nearly all respondents (98%) reported feeling stressed in the past three months. Employees were most likely to report high levels of stress caused by their job (47% of participants), saving for the future (34%), paying off debt (33%) and their weight (30%).

Fidelity found a link between debt and work productivity. Employees with the highest levels of debt have twice the absenteeism of those with the lowest levels of debt, and miss an additional full week of work more when comparing the two groups. When looking at various types of debt, past-due medical bills were the leading indicator of workplace absenteeism, with one in eight workers reporting struggling with unpaid medical bills. In addition, 84% of the people with unpaid medical bills are financially unwell, two-thirds don’t get enough sleep and they miss an average of three additional days of work annually. More well-known forms of debt, like student loans and credit cards, were not a significant cause of employees missing work, Fidelity said.

When compared with workers who were not struggling with debt, workers with debt challenges are very unlikely to be in “excellent” health (only 14% of those struggling were in excellent health, compared with 35% of workers without debt issues); are significantly less likely to get enough sleep (35% vs. 54%) and are significantly more likely to be frequently stressed or anxious (46% vs. 26%).

LIMRA SRI says while most advisers support financial wellness services, managing debt is one of the least likely features to be included in the wellness programs.

The research suggests health and wealth are intrinsically connected. Achieving wellness in either the health or financial domains is extremely rare when facing challenges in the other—poor physical health generally correlates to poor financial health, and vice versa. According to the survey, only 4% of employees who had poor health ratings achieved strong financial wellness scores, yet 60% of people who are “well” in terms of health are also financially well.

Fidelity’s Total Well-Being survey analyzed responses from 9,315 workers across the U.S. who have a 401(k) or 403(b) account with Fidelity. Survey participants represented the full working age range (21 to 75, median of 45) and were distributed fairly evenly by generation (28% Millennial, 36% Gen X and 33% Baby Boomer) and gender (46% male, 54% female). About two-thirds (67%) had a college degree or higher.

More about the study findings can be found here.

Retirement Planning Needs to Include Discussions About Health Care Costs

Nearly two-thirds of advisers say their clients expect advice on health care costs in retirement, and 34% say their clients would likely leave them if they didn't help them estimate and plan for out of pocket health care costs in retirement.

While advisers say their clients display confidence about future health care costs, a recent Nationwide Retirement Institute survey finds they also say it is a top fear for many.

 

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Conducted via The Harris Poll with 1,007 adults over age 50 and a household income of $150,000, the online study found 76% of advisers say their clients are confident in their plan to pay beyond what Medicare covers for health care during retirement. However, more than one in three (35%) clients do not share similar sentiments. Even though the remaining 65% of clients have a plan in place to cover these costs, 72% of advisers say clients do frequently express concerns about health care costs in retirement.

Nearly two-thirds (63%) of advisers say their clients expect advice on health care costs in retirement. In addition, 34% of advisers say their clients would likely leave them if they didn’t help them estimate and plan for out of pocket health care costs in retirement.

 

In addition, according to the survey, 73% of client respondents list out-of-control health care costs as one of their top fears throughout their retirement years. And, 35% of wealthy older Americans working with an adviser indicate that they are not confident in their plan to cover health care costs beyond what Medicare pays.

 

“Our survey reveals a gap between what advisers think and what many of their clients think when it comes to health care costs in retirement,” says Ron Ransom, senior vice president of integrated relationship strategies for Nationwide. “The rising costs of health care impacts everyone and many clients are worried. Advisers can build their confidence by having more conversations about their plan to cover those health care costs.” 

Impediments to discussing health costs in retirement

 

Dialogues on health care considerations between advisers and clients face challenges as certain participants feel uncomfortable reviewing the matter. The survey found 52% of clients have yet to openly discuss health care costs with their adviser; 37% say this is because they believe it is a personal issue.

 

Though the study reports advisers consider the topic “at least somewhat important” (98%) or “very important” (71%) to discuss with clients, 75% admit it is challenging.

“While often considered personal, you can’t adequately plan for health care costs without discussing the topic,” Ransom says. “Balancing health care costs with a lifestyle goals conversation may make it easier for the adviser to best address their client’s anticipated or unanticipated needs in retirement.”

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