There can be a fundamental lack of knowledge among workers about how best to save for retirement. Employers have taken note, and many are now offering “financial wellness” benefits.
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Recently, a friend's daughter began working at a child care center. The work, as any caretaker of small children knows, can be physically and emotionally demanding. So it was surprising to this young lady when a new hire showed up a few weeks back—a woman clearly past retirement age.
The new hire revealed that she had made a career in education, retired, but prevailed on a friend to get her a job at the day care center when she could no longer support herself on her retirement savings.
"Start saving now," the woman advised my friend's daughter, who's in her early 20s. "Because I didn't."
The AARP recently noted that many people are working longer than ever—with 1 in 3 people ages 65 to 74 expected to be in the workforce by 2028.
Longevity and the decline of defined company pensions are partly to blame for older workers not being able to retire earlier. There's another dynamic at play: a fundamental lack of knowledge among workers about how best to save for retirement.
Employers have taken note, and many are now offering "financial wellness" benefits. They can include guidance on budgeting and debt reduction; investing and retirement planning; identity theft and fraud awareness; planning for children and college; insurance; and estate planning.
Can these corporate programs help employees save?
TheNew York Times considers the question.
Organizations Address Financial Hardships from Pandemic
In the wake of the COVID-19 pandemic and rising turnover rates,
employers may give renewed consideration to financial wellness offerings such as emergency funds, financial planning, and tuition and student loan assistance, according to
a survey report by the Society for Human Resource Management and Morgan Stanley. Such programs can help companies hold on to their workforces. They're said to boost productivity and cut health care costs because employees are less stressed.And employers are being encouraged to develop financial education programs designed to meet the needs of specific demographic segments, including women, LGBTQ individuals, racial and ethnic minority employees, and those at specific income levels or living in certain geographic locations, to help make financial wellness more relevant to employees' lives.
The 2021 TIAA Institute-GFLEC Personal Finance Index report underscores financial hardships brought by the COVID-19 pandemic, especially among minorities who have been disproportionately affected. The survey, completed in January by more than 3,000 U.S. adults, found that 32 percent of Black and Hispanic Americans find it difficult to make ends meet in a typical month, compared to 18 percent of white Americans.Elevating Financial Wellness Benefits Businesses
In mid-July, big-name companies like Chipotle, Chobani, Even, Prudential Financial and Verizon signed on to
The Worker Financial Wellness Initiative, designed to make workers' financial security a C-suite and investor priority.
Created by JUST Capital and PayPal in collaboration with the Financial Health Network and the Good Jobs Institute, the initiative, according to the founders, "elevates the necessity of worker financial well-being."
"Research shows that improving workers' financial wellness benefits not only [helps] workers themselves, but also business outcomes such as productivity, innovation, customer satisfaction, and employee turnover and engagement," the coalition noted.
The companies agreed to conduct a financial wellness assessment of their workers and to take steps to address their financial vulnerability.
Other employers are finding that investing in their workers' financial literacy can pay sizeable dividends.
PayPal Financial Wellness Programs Cut Turnover
Twice in the past seven years, PayPal CEO Dan Schulman lived on the streets of New York City and stood in line at check-cashing shops so he could get a firsthand feel for what it's like to be a financially-strapped American. He recalls it took him five hours to panhandle less than one dollar.
In 2018, a survey commissioned by Schulman found that 60 percent of PayPal's employees had a net disposable income of between 4 percent and 6 percent—hardly enough to save for emergencies, much less a child's college education.
PayPal launched a financial-wellness program after realizing its employees were struggling. After putting the program in place in 2019, the average net disposable income for Schulman's workers went up to 16 percent.The payoff from this PayPal initiative, the company says, includes the fact that employee turnover in some locations has been cut in half, saving the company millions in staffing costs.
Companies Should Shoulder Retirement Responsibility
BlackRock CEO Larry Fink
called on company executives to "embrace a greater responsibility to help workers navigate retirement" in one of his annual letters to shareholders.
"Retirement, in particular, is an area where companies must re-establish their traditional leadership role," he wrote. "For much of the 20th Century, it was an element of the social compact in many countries that employers had a responsibility to help workers navigate retirement. In some countries, particularly the United States, the shift to defined contribution plans changed the structure of that responsibility, leaving too many workers unprepared. And nearly all countries are confronting greater longevity and how to pay for it.
"This lack of preparedness for retirement is fueling enormous anxiety and fear, undermining productivity in the workplace and amplifying populism in the political sphere."
Fink urged executives to lend "their expertise and capacity for innovation to solve this immense global challenge. In doing so, companies will create not just a more stable and engaged workforce, but also a more economically secure population in the places where they operate."
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