Just under 20 percent of American workers had access to financial planning benefits through their employer last year, the Bureau of Labor Statistics recently highlighted at its news publication, the Economics Daily. According to BLS data from last March, these benefits were more commonly enjoyed by high-earning employees, employees of larger organizations, and those in certain skilled professions:
Employees in larger establishments (100 workers or more) were three times as likely to have access to financial planning benefits as employees in smaller establishments (1–99 workers). Workers in higher wage groups were also more likely to have access to financial planning benefits as workers in lower wage groups.
Nearly half of workers in the information and finance and insurance industries had access to financial planning benefits. Fewer than one in ten workers in construction and leisure and hospitality had access to financial planning benefits.
The BLS data belies the growing interest in financial wellbeing offerings among employers in the US and globally: Surveys have found that a large and growing majority of American employers are offering some form of financial wellbeing benefit. The employer-provided or subsidized financial planning services tallied in the bureau’s Employee Benefits Survey are just one of many ways organizations can help their employees better manage their finances.
2017 was a good year for the stock market in the US, with the S&P 500 index rising 22 percent and the Dow Jones industrial average up 25 percent. This bull market has led to a spike in the value of Americans’ retirement savings accounts, which sounds like good news for the retirement readiness of the US workforce. However, Todd C. Frankel and Thomas Heath point out at the Washington Post, these huge gains are inspiring many working Americans to dip into their 401(k)s and IRAs at a hefty penalty to fund big-ticket purchases:
“I’ve seen more money requests for extraneous items in the last six weeks than I have in the last five years,” said Jamie Cox of Richmond-based Harris Financial Group, which manages $500 million in savings for about 800 middle-class families. … Cox said he is seeing more people take larger withdrawals, $20,000 to $40,000, to fund dream vacations or home improvement. …
The average annual return for 401(k)s hit 15.7 percent by the third quarter of 2017, according to Fidelity. And for most Americans, it’s these retirement accounts — 401(k), 403(b), SEP and IRA — that provide the closest evidence of a revving stock market. Retirement assets — including annuity reserves, pensions, and defined contribution plans such as 401(k)s and IRAs — exploded in the United States from $11.6 trillion in 2000 to $27.2 trillion as of Sept. 30, 2017, according to the Investment Company Institute, which represents the mutual fund industry.
In some cases, the early withdrawals financial planners are seeing reflect an irrational belief that the good times will roll on long enough for their retirement accounts to make back the money they are taking out. For others, however—especially workers approaching retirement age—the impulse to cash out comes from a fear that the stock market is overvalued and a crash is on the horizon that will wipe out their savings if they don’t get out in time.
A recent survey conducted by LinkedIn and Harris Poll examined what success means to the typical US employee today. The results underlined several trends we’ve been seeing in recent years in what employees care about the most. Corner offices and fancy titles are no longer seen as status symbols the way they once were, while employees are more interested in learning new skills, not missing out on career opportunities, and helping others succeed as well as themselves.
LinkedIn also found, however, that Americans are heavily preoccupied with paying their bills and getting or staying out of debt:
Two out of five professionals don’t list being passionate about their job as a measure of success – instead they’re in it to pay the bills (69%). And living problem-free is a top priority, as nearly three-quarters (74%) are in it not to worry about money. This motivation is helping to usher in the age of the side hustle. Whether it’s moonlighting in an art gallery or building websites on the weekends, more than one-third of professionals today (36%) find success in pursuing a passion project or side job.
Fast Company’s Rich Bellis remarks on the dark side of these findings, noting that 68 percent of men and 76 percent of women said they considered “not living paycheck-to-paycheck” a measure of success, compared to just 17 percent of women and 23 percent of men who defined success as “having material wealth.” These gender differences, Bellis suspects, are illustrative of the gender pay gap and the relatively greater financial insecurity women experience as a result. Yet it’s “a little troubling,” he writes, that most Americans would consider themselves successful just for keeping their heads above water.
Although unemployment is low, jobs are plentiful, and by most accounts the US economy is in good health, CareerBuilder’s latest survey of the financial state of the US workforce paints a more troubling picture, finding that 78 percent of Americans are living paycheck-to-paycheck at least some of the time—that’s up from 75 percent in last year’s survey. Some of the more detailed findings include:
Thirty-eight percent of respondents said they live paycheck-to-paycheck sometimes, but 17 percent said they usually do and 23 percent said they always do.
- Women are more likely to live paycheck-to-paycheck (81 percent) than men (75 percent).
- One quarter of workers have been unable to make ends meet every month in the last year, and 20 percent said they had missed payment on some of their bills.
- Seventy-one percent said they were in debt, up from 68 percent last year, and more than half of those in debt believe they will never get out of it.
- Thirty-eight percent do not participate in a 401(k) plan, IRA, or other retirement plan, and 26 percent said they had not set aside any savings each month in the last year.
- Most workers (81 percent) had worked a minimum-wage job at some point, and 71 percent of them said they had not been able to make ends meet during that time.
And while low-income workers are relatively more likely to live paycheck-to-paycheck, they are by no means the only ones doing so, CareerBuilder notes—meaning even employers of well-compensated professionals should not ignore the financial wellness concerns of their employees:
A new study from the Center for Financial Services Innovation finds that nearly half of US adults are living paycheck-to-paycheck, with expenses equal to (or even greater than) their income—including 54 percent of those aged 18-25—CNN Money‘s Anna Bahney reports:
Of the 25% who say they have too much debt, 96% report being stressed. This kind of financial stress has lasting health effects for those constantly working to cover the nut, says [Jennifer Tescher, president and CEO of CFSI]. “We can’t deal with their health problems if we can’t deal with their financial health.” …
Certainly we can all do the hard work of cutting back on our expenses, says Tescher. But she says the results of this study show something more structural than individual spending. “People are spending a shockingly large amount of income on housing. They have to pay for transportation to get to a job. These costs are going up while their wages stay the same.” Another major contributor, according to the study, is irregular income. Nearly 40% of those who spend as much or more than their paychecks have volatile income, which means it varies from day to day, week to week, month to month.
The issue of employees’ financial insecurity is highly salient for employers, who are increasingly aware of the negative impact financial stress has on well-being and productivity. This topic came up in the Minneapolis Evanta leadership summit in Minneapolis earlier this month, during a boardroom discussion on emotional resilience. Several companies were talking about introducing financial wellness benefits and receiving feedback from the vendors that so many of their employees were living hand to mouth that they didn’t need financial wellbeing benefits, they need debt consolidation guidance.
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Kevin Mahoney, senior institutional consultant at The Mahoney Group of Raymond James, a financial advisory firm, wants employers to take 401(k) plans and health savings accounts (HSAs) out of their silos and consider them instead as two sides of the same long-term financial-planning and investment coin. SHRM’s Stephen Miller shares his notes on the talk Mahoney gave at SHRM’s 2017 Annual Conference and Exposition this week:
HSAs have triple tax advantages. While funds contributed to either an HSA or a traditional 401(k) are excluded from income taxes, HSA contributions, up to annual limits, are also excluded from FICA and FUTA payroll taxes. In addition, funds can be withdrawn from an HSA on a tax-fee basis to pay for health care expenses.
“Many people don’t realize that if you save your health care receipts in a file today, then during retirement you can withdraw HSA funds tax-free against those years-old receipts,” which can turn the HSAs into a fund to pay for more than just future health care expenses. These advantages lead to a startling idea: “HSA savings is probably the best approach a young employee can take, so contributing to an HSA up to the limit—even before contributing to a 401(k)—makes sense,” Mahoney said.
After US Secretary of Labor Alexander Acosta announced last month that the department could find “no principled legal basis” to delay it any further, the Obama administration’s controversial fiduciary rule went into effect on Friday, June 9 as scheduled—though its legal enforcement mechanisms will not become effective until January 1, 2018. The rule, which requires financial advisors to act in their clients’ best interests when advising them about retirement, may still be revised through regulatory or legislative action, but in the meantime, employers that sponsor retirement plans now have an obligation to ensure that their advisors are following the fiduciary standard, experts tell Paula Aven Gladych at Employee Benefit News:
At this point in the process, retirement plans should know if their adviser is working in their best interest or is a broker-dealer with potential conflicted advice offerings. If they don’t know that, they need to call their service providers to find out. Plan sponsors should also review the letters they receive from their plan advisers and take note of whether some services they were receiving in the past won’t be available because their service provider can’t provide them without having fiduciary status. …