'Unready' for retirement: Employee financial wellness needs and expectations in 2024

A recent survey of 1,000 full-time workers found many are struggling to adequately prepare for retirement, revealing a tenuous sense of financial wellness.

“The Retirement Readiness Annual Report” from Betterment at Work found that workers’ emergency funds are being depleted, prompting them to prematurely tap into their retirement savings. As a result, employee financial wellness “has continued to trend downward,” leading to increased anxiety and instability, according to the report.

Here are some of Betterment’s key findings.

No. 1: A sense of instability

Betterment’s survey found that 60% of employees said they faced some financial instability, while 31% reported contending with moderate to significant financial instability, the latter representing an increase of 9 percentage points since 2022. About a third of workers told Betterment that they had taken on additional jobs during the previous 12 months to help make ends meet in the face of financial instability. As a result, only 45% of respondents felt “confident” or “very confident” in their ability to achieve their financial goals.

No. 2: Retirement readiness

As part of its survey, Betterment asked participants how much they believed they would need to save for retirement – 61% said they thought they would need to save at least $500,000. However, only 31% expected to have that much saved. Overall, only 40% of workers feel “confident” or “very confident” that they will be able to save enough for retirement.

Hindering workers’ retirement readiness is that 30% of respondents said that they had tapped into their retirement savings over the previous 12 months to pay for short-term expenses, up 2% from 2022.

No. 3: Emergency funds

Workers increasingly are less likely to have an emergency fund. Only 52% of surveyed workers said they had an emergency fund in 2023. That compares to 59% of workers in 2022 and 66% in 2021. Eighty-two percent of the workers who do not have an emergency fund said they simply don’t have the funds to build one. Meanwhile, 46% of workers used their emergency fund in 2023, a jump of 9 percentage points from 2022.

No. 4: Finances and anxiety

Due to the acute financial stresses they face, 78% of workers said that their finances caused them anxiety, representing a 7 percentage point increase from 2022. Of that group, 58% said the financial anxiety made it challenging for them to focus on their jobs at work this year.

“Financial anxiety isn’t an isolated issue: it can impact every aspect of your employees’ lives, from their homes to the office and more,” said Edward Gottfried, senior director, product management, Betterment at Work. “What’s more, this strain can impact productivity and have a direct effect on your business. As so many people struggle with this, employers have an opportunity to think critically about what they can do to help assuage financial anxieties.”

No. 5: How benefits could help ease anxiety

Betterment asked respondents which benefits at work would most reduce their financial anxiety, and 52% pointed to a 401(k) matching program as providing relief, 49% said an employer-sponsored emergency fund would help and 39% said a 401(k) plan would be valuable. According to Betterment’s report, those responses show that “employees are craving financial support to meet both their long-term retirement goals and support with short-term needs.”

“Offering a benefits package that helps meet critical needs – such as a retirement plan – accompanied by access to a financial advisor or emergency fund, can go a long way toward showing employees that you care about their well-being and are here to help alleviate their financial stress,” Gottfried said.

No. 6: What employees want vs. what employers offer

Betterment’s survey showed that there are benefits that workers want that they rarely can access. For instance, an employer-sponsored emergency fund was no. 3 on the most-wanted benefits list for workers – behind a retirement plan and a 401(k) matching program – but just 8% of employers offer one. Other popular-but-rare benefits included a wellness stipend (no. 5 on the most-wanted list, 9% of employers offer it), student loan financial assistance or repayment programs (No. 9, 11%), childcare support (No. 10, 8%) and a 529 college savings plan (No. 11, 5%).

Related: Emergency savings account: A valuable benefit now made easier with SECURE 2.0

“It’s clear that employees are eager for more offerings like an employer-sponsored emergency savings fund,” said Harlyn Croland, head of business operations and strategy, Betterment at Work. “These additional benefits can catch the eyes of employees who might be considering a change – both to keep your current employee base engaged and to attract prospective employees.”

No. 7: Impact of advisors

Of those workers surveyed, 17% have access to a financial advisor through their work. Thirty-nine percent of those with access to an advisor met with them one time in the previous 12 months, while another 45% met with an advisor two to three times. The most-discussed topics were retirement planning (71%) and investment advice/portfolio reviews (54%). Critically, 94% of respondents said meeting with an advisor was either very useful, useful or somewhat useful.

“The data reveals that there is real demand for human-led advice in the retirement market, and that this could be an important piece of the financial wellness pie for employees,” said Thomas Moore, senior director, Betterment for Advisors.