Supporting Employees’ Financial Health in the Current Economic Climate

According to Franklin Templeton’s 2023 “Voice of the American Worker” survey, 66% of American workers say they’ve experienced negative effects due to the current economic environment. Those effects include feeling anxious, having trouble with sleep, strained social relationships and being distracted at work. The survey identified 3 key insights regarding the effects of the current economic climate on workers and offers some sound ways to keep employees engaged with saving for retirement. Continuing to offer planning support and resources is one of the best ways you can help them keep moving forward.

SURVEY INSIGHT: The current economic climate is accelerating financial stress and affecting how employees address their financial future.

Digging Into The Data

As American workers struggle with economic uncertainty, their feelings toward financial independence, plans for retirement, and job security have all been affected. The percentage of workers highly stressed by their financial health is up 7% year-over-year. Perhaps as a survival instinct, financial independence has become their primary goal, with 81% of workers stating, “I am focused on becoming financially independent.” The survey defines financial independence as having enough income or wealth sufficient to pay one’s living expenses without having to be employed or dependent on others.

Plan Sponsor Considerations

It’s an important time for employers to check in with their employees to see how they are feeling and offer support. Providing employees with a network of resources in times of uncertainty may help improve wellness across all dimensions, including financial, physical, and mental. Financial resources and support could include offering the services of a plan advisors who offers one-on-one advice and guidance. Core retirement plan education campaigns should also be refreshed and prioritized. For example, long term historical market performance illustrations that include timelines for past economic challenges can help employees gain perspective and confidence in the future. In addition, consider proactively distributing materials that help employees gain a better understanding of inflation (again utilizing a historical perspective) and how to best manage it through their investment strategy.

SURVEY INSIGHT: American workers feel the impact of the current economic climate when considering their plans for retirement and are reacting accordingly.

Digging Into The Data

The current climate has pushed the planned retirement age of survey respondents back 3 years, from 62 to 65, with 73% of survey respondents agreeing that “the soaring living expenses changed the way I envisioned my retirement.” However, they are still focused on saving for retirement, with 57% more likely to contribute to their retirement account despite cash flow challenges.

Plan Sponsor Considerations

The good news is that employees are seeking more direction and advice in the current economic environment and are less likely to cut back on their retirement savings. However, their higher expenses are causing stress and could impact their work. If employers are unable to increase employees’ pay, they should consider offering benefits and incentives that could be just as impactful. Budgeting, cash flow management and building an emergency savings account are all important topical considerations to help employees keep moving forward and address their financial goals. SECURE Act 2.0 also allows employers to offer a small financial incentive, such as gift cards, for participating in the plan. Such an incentive could motivate those employees who are reluctant to participate in the plan during tough economic times. Please note that plan assets cannot be used to fund the incentive.

SURVEY INSIGHT: American workers turn to employers for more personalized support in improving well-being across all dimensions.

Digging Into The Data

70% of American workers said, “When it comes to benefits, I would like more holistic options to address the current economic climate.” The survey defines this as being able to assess all of their financial goals together. Personalization and customization go a long way when it comes to American workers’ retirement savings behaviors with 77% stating they’d be more likely to participate or contribute more to their retirement savings if there were more personalized 401(k) investment options.

Plan Sponsor Considerations

By providing more holistic benefits to address the full range of employee needs, employers can play a key role in improving wellness and engagement within their workforce. For example, more personalized 401(k) investment options could come in the form of a managed account or other investment solution that incorporates factors such as age, income and years to retirement.

Sources/Notes:

Franklin Templeton. (2023). Voice of the American Worker Survey. Voice of the American Worker Survey | Franklin Templeton

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Pensionmark Financial Group, LLC (“Pensionmark”) is an investment adviser registered under the Investment Advisers Act of 1940. Pensionmark is affiliated through common ownership with Pensionmark Securities, LLC (member SIPC).