Large employers could save $65 million with better retirement preparedness: Study
All career stages can reap the benefits of a financial wellness program, with reductions in retirement age a result for some.
Improving employees’ financial health through a financial wellness program so that they’re better prepared for retirement could save big companies more than $65 million a year.
That’s according to Financial Finesse’s Financial Wellness Think Tank, which released new research quantifying the improvements in employee retirement preparedness that generate ROI for an employer by cutting the costs of delayed retirements.
It found that employees who repeatedly engage with a financial wellness program that improves average workforce financial health from a 4.0 to a 6.0 (on a 10-point scale) increases employee retirement plan contribution rates by a factor of 38 percent from original rates.
In addition, employees could retire younger while still replacing 80 percent of their income—the ROI model indicates that the delay could fall by two years, from 68.95 years to 66.96 years.
If that’s applied across a workforce of 50,000, the reduction in average retirement age could result in that more-than-$65 million annual savings.
All career stages see the benefit, with reductions in retirement age happening for all workers; employees under age 35 see the biggest reduction, of 2.67 years, while older employees still cutting a year off the time they have to work till retirement.
Says the report, “This suggests that comprehensive financial wellness programs which repeatedly engage employees can be effective in mitigating current costs of delayed retirement, as well as future costs.”
Even smaller improvements in employee financial wellness bring about meaningful savings. If that improvement from 4.0 to 6.0 were only 4.0 to 5.0, that still results in a 17.85 percent increase in retirement plan contribution rates, thus lowering the average projected retirement age by one year.
This could generate over $33 million in savings from reducing delayed retirements.
Improvements in employee financial wellness are incremental, according to Liz Davidson, founder and CEO of Financial Finesses, and increase with the number of interactions, so companies should focus on creating multiple channels to reach employees and engagement techniques which encourage them to keep coming back.
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