Workers who get advice on all money matters impacting their lives do a better job saving specifically for retirement, a new report suggests.
Among more than 2,400 employees who have had access to ongoing coaching for all aspects of their financial lives, the average retirement-plan contribution rate climbed to 9.4% of pay in 2018 from 6.3% in 2013, according to research from the Financial Wellness Think Tank, which is sponsored by financial-wellness benefit provider Financial Finesse.
Additionally, the share who said they are on track to reach their retirement income goal jumped to 57% in 2018 from 21% in 2013.
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Overall, financial wellness among the financially coached workers improved during that five-year period to 6.4 from 5.0 on a scale of 1 to 10. That compares to an average score of 5.5 for all of the 54,800 employees who completed the 2018 financial assessment used in the research. Feeding into those scores are factors such as whether workers pay bills on time every month and avoid carrying a credit card balance from month to month.
“The employees with the most financial stress have issues at the foundational level — things like cash flow, building an emergency fund, debt management — and are the ones who have more trouble saving,” said certified financial planner Greg Ward, the think tank’s director.
The report is based on annual assessments that workers at companies fill out as part of their financial wellness benefit provided through Financial Finesse.
While the study also shows improvements over three years from all participating workers, that larger group’s scores are lower in a variety of areas than the five-year participants.
For example, while the 2018 contribution rate among among the financially coached reached 9.4%, those who went without it remained at their measured 2013 level of about 6%. Also, 69% of the smaller group said they were confident in their investment allocation vs. 51% among all employees in 2018.
“We also saw similar results in other areas of financial wellness,” Ward said.
Although U.S. workers often hear the refrain of “sock away as much money as possible for retirement,” many of them face competing priorities — i.e., paying off student loans or credit card debt, saving for a house or child’s college — that can stand in the way of longer-term savings. Even creating and sticking to a budget can interfere with a person’s longer-term financial goals.
Yet with various studies warning of retirement shortfalls for many Americans, workers could use all the financial guidance they can get.
The median retirement account balance for savers ages 55 to 64 was $71,105 in 2017, according to a 2018 study from Vanguard. Health-care costs alone are an estimated $285,000 for the average couple, Fidelity Investments research shows.
Employers increasingly are playing a role in helping their workers with financial issues that go beyond retirement savings. While just 27% of companies surveyed for a 2019 report by Alight Solutions said they have financial-wellness programs in place for their employees, 53% said they are in the process of creating one.
Of course, that can mean different things at different companies, ranging from access to financial tools (i.e., a retirement calculator or budgeting tools) to personal, hands-on help. Ward said that the financial wellness benefit involved in the think tank’s study includes access to one-on-one advice with a CFP either online or in person.
In addition to boosted retirement savings rates, the average contribution to health savings accounts rose to $1,319 in 2018 from $934 in 2013 among those in the program for five years.