Facing increasing longevity and the challenges of extended caregiving, American workers are navigating an increasingly complex financial journey, according to the most recent Bank of America Workplace Benefits Report.
The report shows women continue to lag behind men in terms of feeling financially well and confident about their retirement aspirations—but financial optimism remains somewhat muted across the board. Only a small majority (55%) says their financial condition is “good” or “excellent,” compared with 29% saying “average” and 16% saying “poor” or “fair.” Interestingly, compared with data gathered in 2018, there are fewer Americans who feel they are in “poor” or “fair” financial health, but at the same time, fewer Americans feel they are in “good” or “excellent” financial condition—meaning a sizable portion of the population (9%) moved into the “average” category in that short time frame.
Lorna Sabbia, head of retirement and personal wealth solutions for Bank of America, says that when employees who feel financially well are compared to those who feel less well, a mix of short- and long-term factors contribute directly to the feeling of financial wellness. When compared with employees who are not financially well, employees who are financially well are more likely to say they can effectively manage their day-to-day expenses, they are more likely to feel their savings for retirement are on track, and they are more capable of paying bills and saving for future goals at the same time.
Given the fact that most Americans generate the vast majority of their income in the workplace, the availability of generous and well-designed programs that help address employees’ overall financial situation can have a direct impact on how well employees feel, the report explains. The data shows employers are embracing this fact, as 53% reported offering some type of financial wellness program in 2019, compared with 24% in 2015.
From the employee perspective, Bank of America finds, there is a pretty clear hierarchy of preferences for employer-provided financial wellness benefits that go above and beyond the normal health care and retirement plans workers expect. The top five are as follows:
- Advice from a professional, such as a financial adviser, planner or accountant
- Information on financial topics separate from 401(k) plan education
- Availability of a variety of financial products and services that help employees
- Review and evaluation of employees’ individual financial situations
- Online financial tools or calculators that go beyond the topic of retirement, for example by helping with debt payoff, mortgage calculations, loan planning, etc.
“Bank of America has spoken to many employees about financial wellness through surveys, focus groups and interviews,” Sabbia says. “This dialogue has shown that education and tools that address topics like effective debt management, budgeting skills, the ability to save for retirement and the future and providing for one’s family, just to name a few, can all contribute to a sense of financial wellness.”
What Prevents Financial Wellness
The Bank of America report identifies three primary drivers of employee financial stress that impact even those who otherwise feel secure in their employment and financial situation. These are, first, employees’ potential inability to manage health care costs; second, employees’ outside obligations as a caregiver, either for children, a spouse, aging parents or others; and employee concerns about not having a diverse and inclusive workplace.
According to the Bank of America analysis, current health care expenses are not employees’ only concern on that front. Medicare may only cover up to 65% of certain employee medical costs, the report warns, so they will need to plan for paying future health care premiums and potentially significant out-of-pocket costs. Given this, one obvious benefit to explore in the workplace is health savings accounts (HSAs), as well as health care cost management training and support.
When it comes to the challenges associated with caregiving, Bank of America finds, caregivers often speak about how they feel personally fulfilled by their efforts, but they also say they can incur significant costs in terms of their financials, personal health, work and relationships. Indeed, the report shows caregivers miss an average of 12 hours per month of work because of their responsibilities.
The report goes on to suggest that employers are only now starting to understand this challenge, so the pressure is on to find ways to help employees, for example by offering more flexible work hours or paid family medical leave opportunities.
“Even though nearly half of employees are caregivers, the topic is not one that is openly discussed in the workplace,” the report says. “Some employees don’t think of themselves as caregivers and don’t relate to caregiving support that may be offered. Others may be concerned about the repercussions of asking for help from an employer. And in some instances, employers are not promoting the support that caregivers can take advantage of, so employees don’t know to bring the topic up.”
On the topics of inclusion and diversity and their impact on feelings of financial wellbeing, Bank of America says the benefits of a diverse workplace are well documented—but still only half of employers have established diversity and inclusion programs in the workplace. At the same time, only one-quarter are thinking about adding these programs in the future.
“At Bank of America, we believe diversity and inclusion makes us stronger and is essential to our ability to serve our clients,” the report concludes. “We believe that successful workplace benefit programs go beyond traditional retirement and health benefits to deliver resources and support for employees across all life stages, ethnicities, cultures, genders and experiences.”
A Word About Millennials
Millennials tend to rely more heavily on credit cards and loans, engage more frequently in expensive short- and long-term money management behaviors, and display lower financial literacy than older working-age adults, according to a recent study released by the TIAA Institute and the George Washington University’s Global Financial Literacy Excellence Center (GFLEC), dubbed “Millennials and Money: The State of Their Financial Management and How Workplaces Can Help Them.”
The analysis was penned by Annamaria Lusardi, Andrea Hasler and Andrea Bolognesi from GFLEC. The trio finds that “Millennial difficulties” tied to student debt and money management decisions are greater today for those in the age range of 18 to 37 compared with a decade ago. At the same time, young peoples’ financial literacy levels have not improved.
“As one of the largest and most highly educated generations, Millennials play an increasingly pivotal role in our economy,” says Stephanie Bell-Rose, head of the TIAA Institute. “The results of this study are a wakeup call to employers, financial institutions, and anyone else who is concerned about improving economic outcomes and supporting the younger workforce through financial education.”
Key findings show the proportion of young adults with outstanding student loan debt has increased from 34% in 2012 to 43% in 2018, while more than 50% of Millennials are concerned that they may not be able to pay off their student debt. At the same time, the analysis finds, the proportion of young adults accruing high credit card fees increased from 54% in 2009 to 60% in 2018.
To improve the financial literacy and financial wellbeing of this demographic, the report recommends that employers consider the following tactics:
- Start with a financial check-up to assess employees’ current financial wellness. Each individual has specific financial needs and circumstances. This can reveal where an employee is struggling or lacks financial knowledge;
- Focus on an integrated and individual approach that helps employees manage both assets and debt, as well as build short- and long-term savings; and
- Make workplace programs personalized and simple. Research shows that simple language and a step-by-step action plan is critically important to improve engagement and affect behavioral change.
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