Lingering cash and debt management challenges continue to dilute employee confidence and overall financial wellness.
Forty-nine percent of working American adults find it difficult to meet their household expenses on time, according to PwC U.S.'s 2011 Financial Wellness Survey. This is up from 43 percent in 2010. Among those earning $100,000 or more annually, 36 percent still say meeting their household expenses is a challenge.
Additionally, 24 percent of employees said they used credit cards to buy monthly necessities because they couldn't afford them otherwise, representing a nine percentage point increase from 2010. For those earning $100,000 or more annually, that number jumps to 34 percent. Half (50 percent) of survey respondents consistently carry balances on credit cards, and 42 percent of respondents find it difficult to make minimum credit card payments on time (a 14 percentage point jump from 2010′s 28 percent).
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Given these cash and debt management challenges, it's no surprise that 61 percent of employees say they find dealing with their financial situation stressful, and 56 percent say their stress level has increased over the past 12 months. Meeting day-to-day expenses is now more of a concern than funding retirement.
According to the survey, primary financial concerns include not having sufficient emergency savings for unexpected expenses (25 percent), not being able to meet monthly expenses (20 percent), and not being able to retire when they want to (18 percent). These issues were followed by concerns around not being able to keep up with debt (13 percent) and being laid off from work (11 percent).
How does this impact retirement?
Despite corporate investment in programs to educate employees on retirement and investing and the implementation of auto-enrollment and auto-escalation features in company retirement plans, employee confidence in their ability to retire "on time" is low. Just 33 percent of employees feel confident they'll be able to retire when they want to and 46 percent of employees plan to retire later than they previously planned. What's more, 38 percent of respondents state they are saving less overall this year than last. Even more alarming, almost one third (32 percent) believe they'll need to use their retirement plans to pay for expenses other than retirement (education funding, home purchase, etc.).
Respondents planning to delay retirement, not saving for retirement, or saving less than last year cited several reasons for postponing, including:
| | |||
| Expect to delay retirement | 46 percent | ||
| Haven't saved enough | 34 percent | ||
| Retirement investments have declined in value | 18 percent | ||
| Too much debt | 14 percent | ||
| Need to keep healthcare coverage | 14 percent | ||
| Supporting children/grandchildren | 9 percent | ||
| Don't want to retire (prefer to continue working, not ready for lifestyle change, etc) | 9 percent | ||
| Other | 2 percent | ||
|
Not saving for retirement |
35 percent | ||
| Too many other expenses | 45 percent | ||
| Debt to pay off | 28 percent | ||
| Income is lower than last year | 15 percent | ||
| Don't know how to save for retirement | 4 percent | ||
| Other | 4 percent | ||
| Don't know how much to save for retirement | 3 percent | ||
|
Saving less than last year |
38 percent | ||
| Too many other expenses | 37 percent | ||
| Income is lower than last year | 28 percent | ||
| Debt to pay off | 27 percent | ||
| Don't know how much to save for retirement | 3 percent | ||
| Other | 3 percent | ||
| Don't know how to save for retirement | 2 percent | ||
Of those employees aged 55 to 64 who are planning to retire in the next five years (37 percent), less than half know how much income they'll need in retirement (45 percent) or have examined whether they're on track to meet their retirement goal (45 percent). Similarly, 54 percent of employees overall have not examined whether they're on track to meet their retirement goal and 48 percent are not comfortable selecting investments.
Financial stress may contribute to productivity loss
The survey shows that the high degree of stress caused by financial worries is also having an impact on employee productivity, with 29 percent of respondents admitting personal financial issues have been a distraction at work and 48 percent of employees stating they've handled their personal finances during work hours. Personal finances being a distraction at work was highest among employees aged 35 to 44 (40 percent) and those earning $100,000 or more (37 percent), proving that financial stress is not necessarily just an issue for the young and/or those with lower incomes.
While the results show employees are in need of guidance, auto-enrollment, auto-escalation, and existing education methods may not address the real reasons behind retirement concerns and may need to be modified to take a more holistic approach to ensure the broader needs and concerns of employees are met.
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