There was a time when prospective retirees looked forward to generous company pensions. Then in 2004 IBM sparked a corporate exodus from traditional pension plans by shifting new employees into self-funded 401(k) options. Rather than operating a defined-benefit plan, in which the company paid a predictable monthly amount upon retirement, the new 401(k) “defined-contribution” plans leave it to employees to build their own retirement account and manage its assets.
In the preceding decades, retirement counselors prepared people for a healthy retirement by long repeating the metaphor of a “three-legged stool” to capture the elements necessary to survive or thrive after leaving the workplace. The essential three were pensions, Social Security and personal savings. For many millions of Americans, the challenges of flat wages, the Great Recession, and substantial debt have reduced both 401(k) balances and personal savings. The three-legged stool has become wobbly at best. What is to be done?
Are the new offerings of “financial wellness” programs the answer?
As a growing number of employees of all ages face increasingly uncertain retirement, some employers are initiating what they call financial wellness programs. Unfortunately, the breadth and depth of these programs vary tremendously from one employer to another. What they all seem to have in common is a significant gap between what employers provide and what employees want.
Bank of America Merrill Lynch conducts an annual survey of corporate benefits which includes a focus on retirement offerings. The 2018 Bank of America/Merrill Lynch Workplace Benefits Report addresses the nature and adequacy of so-called financial wellness programs. In her introduction to the report, Lorna Sabbia, Head of Retirement & Personal Wealth Solutions, explains:
“The research found that employers and employees agree that financial wellness programs are valuable. However, participation in these programs is not widespread. Employees could benefit further from financial wellness planning that is relevant, timely and easily actionable. The study also shows that enhancing how we offer personalized help, deliver guidance and even integrate healthcare into the conversation can help employees be more financially well. Women in particular experience stress across a number of financial issues and could benefit from additional financial assistance and guidance.”
A deeper dive into the study shows these results:
- “Nearly 2 in 5 or 38% of employees feel less than financially well
- “Only 31% of employees are participating in financial wellness programs”
- “Employees agree that the #1 most helpful resource in improving financial wellness is advice from a professional”
Above all employees seek individual financial counseling
Reflecting on this report and a variety of other sources, Next Avenue Money & Work Editor Richard Eisenberg offered this summary of the central demand and solution:
“Employees also said they want personalized advice from a professional, with the ability to track their progress and accomplishments, factoring in their goals. Similarly, in the International Foundation of Employee Benefit Plans (IFEBP) 2018 survey of employers, in-person, one-on-one meetings were rated as the most effective meeting approach, with the highest participation rates. But financial wellness programs tend to offer group sessions and one-size-fits-all budgeting calculators.”
“For example, 81 percent of workers like the idea of companies automatically enrolling workers in their 401(k) plan, the study found. However, just 22 percent of employers provide the feature. The biggest reason cited for not offering it is concern about employee resistance. Additionally, most employers assume that workers don’t want to give thought to retirement until they’re on the verge of leaving the work force. In contrast, just 40 percent of employees say the same.”
It’s time for employers to invest some of their pension and tax savings in employees
One of the five recommended practices of the Respectful Exits Longevity Agenda is: Provide ongoing, on-demand financial wellness counseling.
The need is clear. The ability of companies to afford and offer a once-a-year professional session to each employee is a reasonable expectation in the face of today and tomorrow’s retirement challenges. You can take a simple step toward making this happen:
Add your voice to that of millions of other workers who have been left on their own to finance their futures.Add your voice to that of millions of other workers who have been left on their own to finance their futures. Together we can make change happen.Click To Tweet