Data & Research October 12, 2021

Retirement Plans and Life Insurance Contribute to Employees’ Financial Security

Employees surveyed say these benefits contribute a lot to their feeling of financial security, but 83% are at least somewhat interested in help with accumulating emergency savings.

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Sixty percent of employees say their employer-sponsored retirement plan contributes a lot to them feeling financially secure, a 5% increase over 2020, according to the “2021 Workplace Wellness Survey,” conducted by the Employee Benefit Research Institute (EBRI) and independent research firm Greenwald Research.

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Of those with an employer-sponsored retirement plan, seven in 10 report that they understand their benefits extremely or very well. Six in 10 say they are satisfied with their plan. Of those without an employer-sponsored plan, 60% are interested in one.

Most employees that were surveyed are currently contributing to their plan and receive contributions from their employer. Of those receiving employer contributions, 68% say they are satisfied with the contribution they get. Slightly less than half report that they contribute equal or up to their employer match; another four in 10 contribute more.

Approximately half also say life insurance and financial wellness programs contribute a lot to them feeling financially secure.

Employees say greater employer financial contributions (34%), increased flexibility (i.e., more benefits to choose from) (28%) and more benefits to help with financial well-being (26%) are the most valuable improvements that could be made to their benefit programs.

The 2021 survey of 2,016 American workers was conducted online July 7 through July 27. All respondents were between the ages of 21 and 64.

Additional Benefits to Help Financial Security

Although the majority of employees say they feel the benefits their employers already offer help them feel more financially secure, 49% of employees express at least moderate concern about their household’s financial well-being. Saving for retirement and having savings in case of an emergency are the top cited sources of financial stress. Sixty-three percent say they feel stressed when thinking about their financial future, though this is down from seven in 10 in 2020.

Two in three employees surveyed report that they feel they have enough savings to handle an emergency. Eight in 10 say they are prepared for an unexpected expense of $500 and six in 10 feel prepared for a $5,000 expense.

Still, 83% of employees say they are at least somewhat interested in an emergency savings account that allows them to save through payroll deduction. And more than half (54%) of employees report their retirement savings are the only significant emergency savings they have.

Since the pandemic has exposed many Americans’ lack of emergency savings, retirement plan recordkeepers have been scrambling to create both in-plan and out-of-plan solutions, according to a report from Commonwealth. Participants’ financial wellness and emergency preparedness have also become more important in advisers’ service models.

When employees surveyed in the EBRI/Greenwald Research study were given a hypothetical $600 monthly benefits budget, overall, they allocated the most money into a retirement savings account, followed by an emergency savings account. Although student loan debt is reported as a big problem and a hindrance to saving, and some employers are considering ways to help employees with student loan debt, the employees in the survey allocated the least amount of the hypothetical monthly benefits budget to a plan to pay down student debt.

Data & Research October 12, 2021

Advisers Reflect on How the Annuity Sales Process Could Be Improved

A new survey shows experience clearly counts when it comes to how comfortable advisers are selling annuity products in an evolving regulatory and economic landscape.

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The Secure Retirement Institute (SRI) recently published a short analysis that compiles financial advisers’ views on the annuity sales process—particularly how it could be made simpler and more straightforward.

According to SRI researchers, the COVID-19 pandemic resulted in “rapid and unprecedented changes” in the annuity industry, as it did across financial services sectors. Many longstanding business practices quickly changed as the industry went remote, SRI says, and it is likely that the changes adopted in 2020 will continue as the new normal for the industry.

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Adding to the inherent complexity of the annuity sales process and the influence of the pandemic, various states are reforming their rules and requirements pertaining to the sale and service of annuity products within their borders. At this point, more than a dozen states have adopted enhanced consumer protections for purchasers of annuities based on a best-interest framework put forward by the National Association of Insurance Commissioners (NAIC). Simultaneously, some more progressive states such as New York have created their own unique—and many say far stricter—annuity sales frameworks, and the U.S. Congress is also getting involved. In June, a trio of lawmakers reintroduced the Registration for Index Linked Annuities Act, a piece of legislation that supporters say will lower barriers to the launch of innovative retirement income products.

The SRI’s data reflects this evolving environment. Compared with other investments, advisers say selling insurance products such as annuities often requires a more extensive process. More than six in 10 advisers, however, describe the annuity sales process, from initial client discussions through transactions, to be “very easy” or “easy.”

“While there were no clear differences in the assessment of the sales process across channel, more experienced advisers were more likely than less experienced advisers to consider the process to be easy,” the analysis explains.

According to the SRI, nearly 70% of advisers with 20 or more years of experience report the annuity sales process as being easy or very easy, compared with 58% of those with two to four years of experience. When asked why advisers found the process difficult, the top reasons given were that the annuity product designs are too complex (63%), that the process requires extra sign-offs and supervision compared with other products (63%), and that there’s a variation in procedures across carriers (32%).

The SRI data shows the top recommendations from advisers to insurance carriers all involved simplification and efficiency. Advisers broadly encourage annuity manufacturers to make their designs less complex; to move toward greater use of technology and reduce paper-based processes; and to limit variation in procedures across carriers.

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