New PwC survey finds that U.S. employees are using their retirement plans as a safety valve for more immediate needs
New York, NY – May 22, 2018– Even with a relatively positive economic outlook, U.S. employees still aren’t confident about reaching their long-term financial goals, and retirement plans continue to serve as a safety valve for more immediate needs, according to PwC US’s 2018 Employee Financial Wellness Survey. As employees continue to worry over uncertainty regarding healthcare in the U.S. and are increasingly pressed to support both aging parents and adult children, the report finds that employer benefits and services will serve as a significant opportunity for their employees.
Despite a more favorable backdrop, employees aren’t confident about reaching their goals
With the market at all-time highs, salaries and bonuses beginning to increase, interest rates still at historical lows, and the potential for a windfall for some from tax reform, more employees appear to be shifting their focus away from the worries of day-to-day financial issues. Yet, less than half of respondents are confident they’ll be able to retire when they want, and nearly two-thirds either say their retirement plans and Social Security won’t be sufficient to support them in retirement or they aren’t sure. Forty-two percent say it’s likely they’ll need to use money held in retirement plans for other expenses, and that number is much higher among employees who are stressed about their finances or impacted by student loans.
“Retirement plan funds have become a safety valve for many who don’t have money set aside for an emergency or unexpected expense,” explains Kent E. Allison, leader of PwC’s Employee Financial Education & Wellness practice. “While some employers are looking to address this growing concern through plan design changes that further restrict loans and withdrawals, they may only exacerbate the situation if employees then seek less favorable ways to meet their needs. It is our continued belief that it will take a combination of strategic plan redesign, along with an increased focus on promoting healthier employee financial behaviors, to solve the issue.”
Amid ongoing uncertainty, healthcare emerges as an even bigger employee concern
For the first time, this survey’s results find that among Baby Boomers’ reasons for delaying retirement, needing to keep healthcare coverage is a more popular choice than simply not wanting to retire. Overall, among employees’ retirement concerns, worries over health issues and healthcare costs combined are even more prevalent than the fear of running out of money. A growing number of employees, now more than one in five, would be willing to sacrifice future pay increases for better healthcare benefits.
Employees face challenges as they care for both parents and adult children
Nearly one in four employees is providing financial support for parents or in-laws, and they face additional financial challenges as compared to other employees – more than twice as many use credit cards to pay for monthly necessities they couldn’t otherwise afford and nearly three times as many say that their finances have been a distraction at work or that their productivity at work has been impacted by their financial worries. They are also more than twice as likely to have withdrawn money held in retirement plans to pay for non-retirement expenses.
The survey also examined the financial burden faced by employees who support their adult children. Among those with adult children, 42% provide financial support to their adult children and more than half are willing to sacrifice their own financial well-being to do so.
“We counsel increasing numbers of younger employees who are experiencing the financial impact of helping their aging parents navigate often overwhelming healthcare expenses, just as these younger employees are wrestling with their own financial challenges. Employees caught in the middle supporting both their parents and their adult children may find themselves in a particularly precarious position, unable to provide for their own financial well-being,” notes Allison.
What employees want in terms of financial wellness benefits from their employer
Employee financial stress continues to be a pervasive issue impacting both employee and employer. When asked what causes them the most stress in their lives, nearly twice as many employees say financial matters as compared to job stress.
Employees are consistent – year over year and across generations – when they define financial wellness in terms of aspirational goals like freedom from stress and financial worry, and making choices to enjoy life. Interestingly, more than half of all employees want to make their own financial decisions but are looking to have someone validate that decision. Employees want a financial wellness benefit with access to unbiased counselors and help understanding and using their benefits. Over the past six years, growing numbers of employees are using the services their employers provide to assist them with their personal finances.
“We find that employees typically seek financial help reactively -- when they have an important decision to make or are in financial crisis,” notes Allison. “The more employers can encourage their employees to use the services on an ongoing basis, the more positive the outcome for employees as they become increasingly proactive in addressing their financial needs.”
PwC’s Employee Financial Wellness Survey tracks the financial and retirement well-being of working US adults incorporating the views of 1,600 full-time employees. Employees may be stressed over organizational shifts, market conditions, personal life events, or benefits changes. PwC’s Employee Financial Education and Wellness practice works with clients to design and deliver financial wellness programs tailored to employee needs and specific employer objectives. Our goal is to empower employees to make educated decisions to improve their financial well-being.
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