As we share results of our ninth annual survey tracking the financial well-being of full time employed U.S. adults, we are in the midst of an unprecedented global health crisis. COVID-19 is not only challenging the way we live on a daily basis, but also posing significant short and long-term economic threats that could have a lasting effect on personal financial well-being.
While the findings are meant to be directional in nature, it is our belief that areas of concern back in January will only be more pronounced today. Our observations and suggestions reflect the realities of the changing employee circumstances we are observing.
Employees are unprepared for an extended economic downturn or recession: Many employees are already in a fragile financial state and unprepared for short-term cash needs, lacking the ability to absorb even a minor shock. In fact, more than one-third of full-time employed Millennials, Gen Xers, and Baby Boomers, have less than $1,000 saved to deal with unexpected expenses.
Financial matters is the top cause of stress and a major distraction at work: When asked what they feel causes them the most stress, more employees cite financial matters than any other life stressor combined, and employees who are stressed about their finances are more likely to be distracted at work. Employees are seeking guidance more broadly on how to prioritize their spending, which bills to pay, and how to handle creditors. Employers have a unique opportunity here to help employees avoid making poor short-term financial decisions at the expense of their overall financial wellness.
Retirement plan withdrawals could further damage already underfunded retirement savings: Changes in the economy may also exacerbate existing issues, including those forced to withdraw retirement funds prior to retirement. Already more than half of Millennial and Gen X employees told us it was likely they would use money held in their retirement plans for something other than retirement, the vast majority for unexpected expenses or medical bills.
Most employees seek financial guidance at key decision points or when they’re already in crisis: Beyond the critical financial decisions needed to get through the immediate impact of COVID-19, employees will need guidance as they recover financially and strive to protect themselves from future financial issues.