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  • Writer's pictureMichelle Marsh

Employee Financial Wellness Report: Stressors Shifting Away from Retirement

Updated: Jan 22

Employee financial wellness is a critical aspect of organizational well-being, and, as a plan sponsor responsible for your company's retirement plan, it is essential to understand its significance. Not only is it an indicator of your employees’ financial security now and in the future, but it also plays a large part in their productivity at work and overall employee retention. In this blog, we will explore the concept of employee financial wellness, highlight the shift in financial stress from retirement to immediate expenses, and offer insights into how you can best support your employees in this aspect.

woman at kitchen table stressed out as she looks over her expenses, highlighting a state of poor employee financial welness.

Understanding Financial Wellness and the Shift in Financial Stress

According to Forbes Advisor, “financial wellness is a relative measure of how well a person manages their financial life.” This is not only relevant to short-term financial goals and money habits, but long-term goals such as retirement security.However, just like in any form of wellness, there are stressors that have an impact on it.

In recent years, there has been a noticeable transition in the financial stress employees experience. Plan Sponsor reports that while retirement planning has traditionally been a major concern, immediate expenses have now taken the forefront. In the survey data, it’s noted that over 50% of employees surveyed said they would prefer a $500 pay increase to a $500 increase in contributions made to a retirement plan. Rising living costs, mounting debt burdens, and unexpected financial emergencies have contributed to this shift. Employees are finding it challenging to balance their day-to-day finances with long-term retirement goals. However, employees are doing a disservice to themselves because they can make significantly more in the long run if this money was deposited into their retirement plan rather than their paycheck. CNBC Make It used a compound interest calculator to find out how much individuals at various life stages would have if they put away $500 a month until the age of 67. They found that a 25-year-old who would have $252,000 if they put the money in their paycheck would accumulate the following If done through a retirement account:

  • $654,763 with a 4% rate of return

  • $1,140,756 with a 6% rate of return

  • $2,073,982 with an 8% rate of return.

The Impact on Retirement Planning

As a plan sponsor, it is crucial to understand the changes in financial stress and their impact on your employees. Let’s explore why plan sponsors should care about this shift and how it impacts employee financial wellness:

Employee Productivity and Engagement

When employees face high levels of immediate financial stress, their focus and productivity at work suffer. Addressing this shift and offering support in managing immediate expenses helps reduce financial distractions and improve overall employee engagement.

Decreased Retirement Contributions

Shifting financial priorities often results in lower retirement contributions, putting employees at risk of not having enough savings when they reach retirement age. Plan sponsors play a vital role in reversing this trend by promoting financial education and providing resources to manage immediate expenses.

Increased Employee Turnover

When faced with mounting immediate financial burdens, employees may seek opportunities elsewhere, resulting in higher turnover costs for employers. By addressing the shift in financial stress and offering support in managing immediate expenses, employers create a more attractive work environment and enhance employee retention.

Retirement Readiness

Ensuring employees are financially stable and prepared for retirement is a key responsibility for plan sponsors. Recognizing the current shift in stressors allows plan sponsors to develop strategies and provide tools that empower employees to effectively manage their finances. This, in turn, leads to improved retirement readiness and overall financial well-being.

origami birds made of $100 bill being released from cage to represent employee financial wellness

Employee financial wellness plays an important role in their ability to have financial freedom during retirement.

Strategies to Improve Employee Financial Wellness

As a plan sponsor, you have the power to enhance employee financial wellness by promoting financial education and providing resources to manage immediate expenses.Here’s a few strategies we recommend:

  • Offer financial education programs covering budgeting, debt management, and saving for immediate needs and retirement.

  • Encourage realistic budgeting and provide tools for expense tracking.

  • Provide retirement planning tools like calculators, investment guides, and readiness assessments to empower employees in making informed decisions.

Want to learn more? Read our blog to discover more ways to help employees manage financial stress!

Collaborating with RPCSI

At RPCSI, we offer a range of services designed to align with your goals of enhancing employee financial wellness. Our CEFEX-certified Third Party Administrators will work with you to develop a plan which will maximize outcomes for plan participants and encourages recruitment and retention of valuable employees.

Remember, addressing employee financial wellness is not only beneficial for your employees but also for the long-term success of your retirement plan. To learn more about enhancing employee financial wellness and the services offered by RPCSI, contact our team for further assistance.

Link to a downloadable infographic to learn what employees really want.


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