This essay explores the profound implications of artificial intelligence (AI) in reshaping the financial landscape for retirees. Artificial Intelligence refers to the simulation of human intelligence in machines…
In our Workplace Financial Wellness in America report, we saw a substantial increase in the percentage of workers
who said they were experiencing high or overwhelming levels of financial stress…
Looking back, 2023 was a year of two opposing stories—and two different economies. For investors, stock market gains helped propel savings balances to levels not seen for several years. By contrast, financially vulnerable workers continued to feel the economic pressure of persistent inflation and higher federal interest rates. These factors have a tremendous impact on financial resilience and retirement preparedness, as well as financial stress levels. Given the strong relationship between financial stress and job satisfaction, mental and physical health, and productivity, the argument for offering financial coaching that helps American workers improve in these areas remains clear.
This white paper explores the impact upon the overall financial wellness of workers when using various financial point solution benefit programs such as earned and early wage access (EWA), buy-now-pay-later (BNPL), and small dollar employer loan programs. It also explores the pros and cons of point solutions and potential positive or negative effects on employees’ overall financial well-being. Analysis and discussion include whether point solutions provide a meaningful “financial wellness” benefit as often touted, or if these limited benefits are more of a short-term fix approach to serious financial challenges faced by workers: pervasive consumer debt, low wages, and cashflow mismanagement. The paper concludes with a comparison of point solution outcomes versus a holistic financial coaching and wellness approach.
The state of financial wellness of the U.S. workforce fell in 2022 as high inflation and economic uncertainty raised employee financial stress to levels not seen since the Great Recession. The rise in financial stress has contributed to declines in overall wellbeing as self-reported mental and physical health have fallen to their lowest points in two decades. Employees that engaged in their financial coaching benefit made substantial improvements in financial behavior; those that engaged with a live financial coach fared even better than those that engaged exclusively with a virtual financial coach. Working with employee resource groups (ERG) to deploy financial coaching benefits tailored to minority experiences has proven to be effective at increasing employee engagement and improving financial outcomes.
The racial wealth gap in America has garnered much attention as part of the fight against social injustice. It is highly encouraging to see many of our partners that have not only publicly pledged their support in this fight, but are actively searching for ways to make tangible headway within their organization. Many are leaning on their financial wellness benefits to do just that, as they understand that improving the financial wellness of their most vulnerable employees will, over time, drive results in this quest for financial equity amongst the races.
In this special report, we’ll explore:
This Q&A is designed to provide quotable commentary on Financial Finesse’s 2021 Financial Wellness Year in Review.
Workplace stress has risen steadily for over a decade, and with the help of a global pandemic has reached a tipping point in 2021. Workers are increasingly expecting more support from their employers, and they are willing to change jobs to get it. To compete for talent, employers must shift their approach to benefit design and corporate culture to accommodate the new workforce. This report examines the divergence in financial wellness priorities that is signaling a shift in the employer-employee relationship and offers guidance for how employers can handle this workplace revolution.
The state of financial wellness of the U.S. workforce improved in 2020 despite the economic challenges created by the COVID-19 pandemic. The greatest improvement occurred in the areas of cash flow, debt management, and homebuying. Employees that maintained a handle on cash flow and an emergency fund prior to 2020 fared best during the pandemic, leading many employers to add financial resiliency to their list of key focus areas in 2021. As concern for racial financial equity and equality grows, we expect to see more emphasis on diversity and inclusion (D&I) in workplace financial wellness initiatives in the coming years.
At the time of this report, America is battling the COVID-19 global pandemic. In response to social and economic pressure, many employers have adjusted the way they do business, including implementing social-distancing protocols, work-from-home arrangements, and in some cases workforce reductions. Virtually all employees, to one degree or another, are experiencing adverse effects to their financial health. These effects are often hardest felt by those that are least prepared to handle them.
Although there is a tendency to look at the workforce as a single unit, employers increasingly need to segment their workforces from a financial wellness perspective because of the disparity in financial stress and behavior that exists among coworkers. In our 2016 ROI Special Report, we introduced a method of segmenting the workforce into five levels of financial health based on employees’ financial wellness scores: Suffering, Struggling, Stabilizing, Sustaining, and Secure. This report includes more detail on each segment.
The state of financial wellness held constant, but the typical employee engaging in a financial wellness benefit is gradually looking younger and more masculine. Improvement in employee financial behavior has been subtle but includes fewer reporting they carry a balance on their credit cards and more indicating they check their credit report at least once a year. The type of engagement—e.g., online, group, individual, or all three—also influences the degree of improvement, with those engaging in all three types garnering the highest levels of improvement. As demand for financial technology coupled with live financial coaching increases, we expect greater improvement in workforce financial wellness for years to come.
The Society of Actuaries Aging and Retirement Strategic Research Program and Financial Finesse are pleased to make available a series of briefs focused on retirement literacy issues. The first brief in the series explores retirement from a holistic perspective looking at non-financial issues. The second brief looks at retirement planning and the things to consider throughout one’s career. The third brief explores the types of expenses that may occur in the first year of retirement. The fourth brief provides a resource for better understanding retirement tools. The briefs were developed by a team led by Greg Ward of Financial Finesse.
In this report we propose best practices for workplace financial wellness programs to offer retirement guidance across an employee’s full career and analyze the positive impact of financial coaching on improving retirement outcomes. We offer a model for measuring the ROI of reducing the costs of delayed retirement for these employees.
Financial wellness improved in 2018 aided by long-term users of holistic, multi-channel financial wellness benefits. Improvement occurred in most areas, including cash and debt management, college and retirement planning, and investing. An in-depth look at workers who engaged in financial wellness benefits since 2013 found significant improvement in retirement preparedness and investing confidence.
The financial stress of American workers moved slightly lower, but levels remain alarmingly high for single, African-American moms. The gender gap in financial wellness slightly widened, particularly in the areas of cash and debt management. Student loans continue to hamper the financial wellness of younger workers, while pre-retirees remain surprisingly unprepared for retirement. Lastly, minority workers improved more than other groups in overall financial wellness.
In this report we propose best practices for workplace financial wellness programs to offer retirement guidance across an employee’s full career and analyze the positive impact of financial coaching on improving retirement outcomes. We offer a model for measuring the ROI of reducing the costs of delayed retirement for these employees.
Each employee has different aspirations for what they want out of life. In this study, we examine three of the most common life events that employees proactively face: buying a home, getting married, and having children. Each of these life events, in one way or another, has a relationship to an employee’s financial wellness. By understanding this relationship and providing employees access to the ongoing financial coaching, tools and benefits needed to effectively prepare for life, employers can enhance employee job satisfaction, promote productivity, and achieve a greater return on investment on their Financial Wellness benefit.
In this report we propose best practices for workplace financial wellness programs to offer retirement guidance across an employee’s full career and analyze the positive impact of financial coaching on improving retirement outcomes. We offer a model for measuring the ROI of reducing the costs of delayed retirement for these employees.
This report examines how financial behaviors over time can create a cycle of low financial wellness. This cycle can affect the ability of different ethnic groups to build and transfer wealth, which impacts the next generation. Employers are in a unique position to help stop this cycle and usher in a new generation of wealth builders.
The Financial Finesse Gender Gap in Financial Wellness report is an annual review of the financial wellness gap that exists between women and men in the workforce. It examines a variety of financial behaviors and outcomes, as well as the societal, psychological and practical barriers to gender parity when it comes to cash flow issues, retirement preparedness and other aspects of financial wellness. The report offers suggestions for employers and individuals to help close the gap and promote total financial wellness for all employees.
American employees continue to experience high levels of financial stress, and could be losing sleep over it. In this research report, we look at which employees are the most stressed about money, and what employers can do to help their employees develop the solid money management and investment planning skills they need to find lasting financial peace of mind.
How much money can a highly effective financial wellness program save your organization? The answer, for most large companies, is well into the millions — and that’s focusing on the costs that are easiest to measure: wage garnishments, absenteeism and utilization of FSAs and HSAs. With additional analysis, companies can also measure the savings from reductions in healthcare costs and delayed retirement. Modeling and survey research can benchmark and measure improvements in employee engagement, productivity, retention and morale. While the most toxic effects of unchecked financial stress, like embezzlement, workplace violence and a culture of negativity, are nearly impossible to calculate, it’s intuitive that reducing financial stress would also reduce those problems.
The Starting Point for Calculating ROI: Financial Finesse’s Predictive Model
The national average financial wellness score is 5, based on Financial Finesse’s 0-10 financial wellness scale which benchmarks each employee’s financial wellness based on an online assessment. A Workforce Financial Wellness Assessment™ aggregates and analyzes this data on the company level. The chart to the left shows the projected costs savings of an incremental shift in the median workforce financial wellness score from 4-6, which has the potential to save a large employer of 50,000 employees approximately $5.6 million a year.
The cost savings illustrated in the above chart are simply a starting point of what is easy to measure — the tip of the iceberg of a much more in-depth analysis that needs to be done to more accurately calculate the true financial impact.
A strong behavioral-based financial wellness program drives results in areas that are much more strategically important to the success of your organization, such as:
Healthcare Cost Savings
A 2014 study from the American Psychological Association reports that 64 percent of those surveyed cited money as a significant source of stress, and that Americans are paying for this stress with their health. Financial stress has been attributed to decreased employee productivity, increased absenteeism and increased employer healthcare costs.
Financial wellness programs are correlated with lower healthcare costs. Our own study of a Fortune 100 healthcare company found that employer healthcare costs associated with employees who used the company’s financial wellness program actually decreased by 4.5 percent, while the costs associated with employees who never used the program increased by 19.4 percent. This equated to a cost savings of $271.50 per employee. If a 50,000-life employer experienced the same cost savings by offering a comprehensive workplace financial wellness program, it could save the employer over $13.5 million a year.
POTENTIAL ANNUAL HEALTHCARE COST SAVINGS
$271.50 (net healthcare savings per employee)
X 50,000 (average number of employees)
= $13,575,000
Reducing Costs of Delayed Retirement
Employees today are woefully underprepared for retirement, with only 21 percent indicating they are on track to achieve their income goals in retirement according to recent research from Financial Finesse. As employees progress through the late career cycle, those who are underprepared may have to delay their retirement for financial reasons. This has repercussions throughout the company in terms of increased health and disability costs as well as the velocity of talent development. According to the Transamerica Center for Retirement Studies®, 65 percent of Baby Boomers either plan to work past age 65 or do not plan to retire at all. For every year an employee who would like to retire delays retirement for financial reasons, the employer faces estimated additional costs between $10,000 and $50,000.
Our research shows that as employee’s overall financial wellness levels increase, so do contributions to retirement plans. Higher contribution rates reduce the likelihood of delayed retirement, since employees are more financially prepared. For younger employees, our research suggests that increases in contribution rates due to improved financial wellness could increase lifetime retirement savings by as much as 12 percent to 28 percent.
Our research also found that employees that engage repeatedly in their employer’s financial wellness program increase their likelihood of being on track for retirement—from 34 percent to 47 percent according to our findings*. For a 50,000-life employer, this 13-point improvement could equate to a $6.5 million annual cost reduction related to delayed retirement.
POTENTIAL COST SAVINGS FOR HELPING EMPLOYEES RETIRE ON TIME
13% (improvement in employees on track to retire)
X 10% (estimated % of workforce nearing retirement)
X $10,000 (estimated annual cost per employee for delayed retirement)
X 50,000 (average number of employees)
= $6,500,000
*Data based on study conducted for Fortune 100 employer using Financial Finesse’s services. Individual company results may vary.
Recruit, Retain, and Engage Top Talent
According to the 2016 Deloitte Millennial Survey, two-thirds of younger employees plan to leave their current job by 2020, with 25 percent saying they plan to leave in less than a year. Turnover costs companies money. Citing the research of W. F. Cascio, the SHRM Foundation’s report, Retaining Talent, indicates that “…direct replacement costs can reach as high as 50 percent to 60 percent of an employee’s annual salary, with total costs associated with turnover ranging from 90 percent to 200 percent of annual salary.” That puts costs anywhere between $45,000 and $100,000 when replacing an employee making $50,000 a year. A 2016 Paychex survey found that approximately 70 percent of employees cited low pay as a reason they have left or would leave a job, and 45 percent said they have or would leave due to a lack of benefits.
In our experience, most employees are dissatisfied with their pay and benefits because they haven’t fully maximized the value of what their company offers. They leave thousands (in some cases tens of thousands) of dollars on the table annually by not taking advantage of free or low-cost benefits such as company matching programs, discounted voluntary benefits, health and wellness benefits, and the small benefits that add up over time like commuter benefits, free parking, tuition reimbursement and others. The money they are foregoing could be the difference between sinking deeper into debt and proactively saving towards key financial goals.
Consider a scenario where a 50,000-life company with a 10 percent turnover rate institutes a comprehensive workforce financial wellness program. If that program resulted in 50 fewer employees leaving the company (i.e., a 1 percent reduction in the turnover rate), it could equate to over $2.2 million in annual savings:
POTENTIAL COST SAVINGS BY REDUCING TURNOVER
1% (projected reduction in employee turnover)
X 10% (turnover rate of employees)
X $45,000 (estimated net cost to replace employee)
X 50,000 (average number of employees)
= $2,250,000
Measuring Your Organization’s ROI
Using Financial Finesse’s predictive model, companies can set research-based benchmarks for their financial wellness program, customized to their employee demographics and financial wellness levels. This starts with a Workforce Financial Wellness Assessment™ to determine the median levels of employee financial wellness and financial stress, followed by implementing optimal outreach based on your workforce demographics. Improving median financial wellness is a process that takes time – there aren’t instant fixes that happen in one quarter. Companies can integrate data based on key measurement variables and benchmark results on a year-over-year basis. For the hypothetical 50,000-employee company discussed here who implements a comprehensive workplace financial wellness program according to industry best practices, pulling all those results together could result in total cost savings of nearly $28 million.
| Garnishments | $ 443,413 |
| FSA/HSA contributions payroll taxes | $ 887,229 |
| Absenteeism | $ 4,264,396 |
| Health care | $ 13,575,000 |
| Delayed retirement | $ 6,500,000 |
| Turnover | $ 2,250,000 |
| Estimated Total | $ 27,920,038 |
