Despite improvements in the U.S. economy, the hangover effect from the 2008-09 recession and slow economic growth continue to erode employees’ retirement confidence and overall financial wellness, according to the PricewaterhouseCoopers 2012 Financial Wellness Survey.
Employees’ financial stress remains high: Overall, 61 percent of employees find dealing with their financial situation stressful, and more than half (56 percent) reported that their stress level related to financial issues had increased over the past 12 months.
The annual survey tracks the financial and retirement well-being of working American adults nationwide, incorporating the views of 1,700 full-time and self-employed adults.
“Employees are still very much burdened by day-to-day financial concerns,” said Kent Allison, partner and national practice leader in PwC’s financial education practice. The resulting levels of stress affect employees’ health and productivity and become an obstacle when it comes to longer-term retirement planning.
While there was a slight uptick in the proportion of employees saving for retirement—67 percent in 2012 vs. 65 percent in 2011—savings remained weak, with 40 percent of respondents reporting that they were saving less for retirement than during the previous year.
As savings dwindle, so does retirement confidence: In 2012, more than half (53 percent) of employees younger than age 65 planned to retire later than they previously intended (up from 46 percent in 2011).
Of those employees who expect to delay retirement, the top reasons they gave were:
• Haven’t saved enough (60 percent).
• Retirement investments declined in value (34 percent).
• Too much debt (26 percent).
• Too many other expenses (25 percent).
• An increase in expenses (23 percent).
• Need to keep health care coverage (21 percent).
• A decrease in income compared to the previous year (19 percent).
• Supporting children/grandchildren (14 percent).
• Don’t want to retire/prefer to continue working (13 percent).
“Competing financial issues are pressuring employees to deprioritize retirement funding by saving less or, in some cases, not saving at all,” said Allison. “Employees are being forced to extinguish more immediate fires—such as making a monthly credit card payment or paying a child’s college tuition—over retirement saving, which from a long-term perspective is highly risky behavior that can leave employees severely underfunded for retirement as they deal with increased longevity and rising health care costs down the road.”
The high stress levels found among employees are encroaching into the workplace: One-third of respondents admitted that personal financial issues have been a distraction at work. Among these employees, 97 percent spent time at work thinking about or dealing with issues related to their finances.
Personal finances being a distraction at work was again highest among respondents ages 35 to 44. However, the income level of those most distracted has shifted from those earning more than $100,000 annually in 2011 to those earning $30,000-$49,000 in 2012.
In 2012, 40 percent of those earning $30,000-$49,000 reported that personal financial issues had been a distraction at work, up from 28 percent in 2011.
Personal Financial Stress Affecting Employee Performance and Retirement Savings, SHRM Research, January 2012
Rising College Costs Heighten Employees' Financial Stress, SHRM Online Benefits Discipline, September 2011
Assessing and Developing Employee Financial Competency, SHRM Templates and Tools, December 2010
SHRM Online Benefits Discipline
SHRM Online Retirement Plans Resource Page