Nearly half of the employee respondents in PwC's 2018 Employee Financial Wellness Survey claim to be stressed over their finances.

That's down a bit from last year's survey, thanks in part to rising wages and stock markets, says Allison. But it's still high. What's more, workers said financial worries were by far the greatest source of stress in their lives—far more than job security fears, health issues, or even relationships in their personal lives.

All of the attention given to retirement preparedness by the financial services industry, politicians, regulators and the media in recent years has obscured the real reason behind workers financial anxiety, says Allison.

For the seventh straight year, PwC's survey has shown that the fear of not having cash to cover near-term unexpected expenses far outweighs the fear of not having enough savings for retirement, particularly for Gen X and Millennial workers.

“There's been a lot of focus on saving for retirement, but the issue of workers' stress is more fundamental to near-term expenses,” said Allison.

Proof of that is found in the high level of loans from 401(k) plans, and what those loans are used for. “They are not withdrawing money for houses and other expenses. They are withdrawing money to cover immediate unexpected expenses.”

More than a quarter of workers have already withdrawn money from retirement accounts to pay for something other than retirement. And another 42 percent anticipate they will have to do so, according to PwC.

Millennials are withdrawing at the highest clip—33 percent. Dealing with unexpected expenses is cited as the most common reason for the early withdrawals across generations. For instance, 55 percent of withdrawals from retirement plans by Gen Xers went to cover an unexpected expense, compared to 3 percent that said they used the assets to buy a home.

For boomers, 45 percent used withdrawals to pay for unexpected expenses, compared to 31 percent that used the money to cover medical expenses.

Analysis paralysis in workplace benefits?

On balance, workers claim to have a good understanding of the savings and benefits programs their employers are offering, and how those benefits impact their financial well-being.

But there may be some cognitive dissonance in that data. Allison cited the wider adoption of health savings accounts as potential evidence that workers are overwhelmed managing benefits options. Less than half of workers that are offered an HSA contribute to one. And when they do, most aren't using the vehicles to fund long-term out-of-pocket medical expenses.

Between managing retirement savings accounts, adjusting health plans, and the wide array of other options on benefit platforms, workers may be suffering from analysis paralysis when it comes to guiding their financial lives.

“It is a bit of a deer-in-the-headlight situation,” said Allison. “Are employees capable of handling all of these decisions? With all of the choices employees have to make, we have a high mountain to climb.”

Even with best retirement plan design, some workers need more help

The evolution from defined benefit retirement plans to defined contribution plans happened “almost overnight,” says Allison.

“On retirement, we've pushed the onus on to the individual,” he said.

Organizations, and even the government, are realizing the situation workers have been put in. Regulations facilitating automatic enrollment and target date funds, and employers moving to more streamlined investment menus in 401(k) plans, have been valuable innovations, said Allison.

More innovations intended to simplify employees' options are coming, he says, noting the push on Capitol Hill to introduce lifetime income options in 401(k) plans.

Further simplification would be welcomed. But Allison doesn't think it will be enough.

“Retirement plan design is a good thing, but it isn't enough. While we've tried to use plan design to address saving shortfalls, we haven't asked why people were not saving in the first place. Down the road, as we continue to introduce more innovations, there has to be some recognition that many workers won't be capable of managing the options, and will need help,” said Allison.

Changing concept of retirement

Some of the numbers on retirement savings in PwC's report are heartening.

Nearly half of surveyed employees have increased savings rates over last year—only 12 percent said they are saving less. Overall, 73 percent of workers said they are saving for retirement.

One quarter of boomers said they have more than $500,000 saved. And 42 percent have at least $200,000 saved.

Still, 32 percent of boomers have less than $50,000 saved. And 43 percent have less than $100,000 stashed for retirement.

“Mathematically, the savings numbers are not where they need to be. That's a considerable concern,” said Allison.

Longevity is the largest retirement implication for workers, their employers, and even the government. Workers must make savings last longer, employers must manage longevity risk when they do offer defined benefits, and the share that Social Security covers of retirement costs will decrease as people live longer.

Those factors are conspiring to redefine what the word retirement means, thinks Allison.

“I firmly believe the concept of retirement will change,” he said. “The reality is that retirement isn't going to continue to be this cut off age where people stop working. The retirement period is simply becoming too long.”

Retirement, for much of the workforce, will evolve to become a transition–not from working to not working, but from leaving a career job for other means of income, said Allison.

“People are going to have to continue to work,” he added.