Practice management

How to help motivate financially stressed employees

Jonathan Young

June 27, 2024

Key Takeaways

  • U.S. workers are highly stressed financially.
  • Retirement savings can be a victim of this stress.
  • Here are three ways to help motivate financially stressed employees to save for retirement.

A recent survey on “The Future of Workplace Financial Well-Being” showed that 86% of employees feel “increasingly stressed” about their financial situation.1 This is bad news for plan sponsors because:

 

  • Workers who struggle financially lose 44% more work time to absences than peers without financial worries.2
  • Financially stressed employees are also more likely to leave, and twice as likely as non-financially stressed employees to look for a new job.3
  • Financially stressed people tend to avoid getting health care, which leads to worse health outcomes and higher health care costs later on.4
  • Due to financial stress, 38% of workers think they’ll now retire later than planned, and delayed retirement can affect employers’ compensation and benefits costs.5

 

According to the BrightPlan 2024 Wellness Barometer Survey report, respondents are losing on average 7.3 hours of productivity each week (dealing with or thinking about issues related to their personal finances), potentially costing U.S. businesses more than $180 billion annually in lost productivity and engagement.6

 

Additionally, employees who lack emergency savings are more likely to withdraw money from their retirement accounts to cover expenses, according to a survey from Fidelity.7

 

As a financial professional or plan sponsor, how do you motivate financially stressed employees to save for retirement? Here are three talking points.

 

1) Use plan features to help reduce participants’ financial stress

 

Financial stress can lead people to make decisions that negatively impact their investment outcomes, such as hoarding cash in low-interest savings accounts or decreasing their contributions to retirement savings. These decisions can have a devasting downstream impact on a participant’s productivity and overall health.

 

For someone who is financially stressed, deciding to save more for retirement can feel overwhelming, especially if there isn’t an easily identifiable first step they can take.

 

Financial professionals can help make things easier for plan sponsors by:

 

  1. Examining plan features to determine how easy (or difficult) it is for an employee at their company to save more for retirement.
  2. Asking plan sponsors if they have implemented automatic enrollment, a qualified default investment alternative (QDIA) and/or auto-escalation to boost their participation rates.
  3. Helping plan sponsors simplify their plan design, conduct an investment re-enrollment, and/or provide access to online tools that allow participants to review their retirement savings progress and help celebrate milestones.

How Amazon helped make it easier

In the early days of e-commerce, buying something online was a frustrating process where users had to type in their name, click to the next step, fill in their mailing address, click to the next step, fill in their credit card information, click, and so on. It could take several minutes — or more — to complete a purchase. Amazon founder Jeff Bezos recognized that the longer it took a customer to place an order, the less likely they were to complete their purchase.


In a conversation with author Greg McKeown in the book, "Effortless,”8 Peri Hartman, one of Amazon’s early developers, recalled a meeting in which Bezos said, “We need something to make the ordering system frictionless. We need to make it so the customer can order products with the least amount of effort. They should be able to click on one thing, and it’s done.” In hindsight, the one-click solution was obvious. Yet, no one had thought of it before. “Nobody was doing it,” Hartman explained. “Jeff said let’s do it. So we did it.” In 1999, Amazon introduced their “1-Click” ordering system, setting the stage for the streamlined online shopping experience we know today.

2) Be open about the company’s commitment to financial wellness

 

There is currently a major disconnect between leaders and their employees when it comes to financial wellness. Again, according to BrightPlan, 92% of leaders report their company offers employees the financial guidance, support and tools they need to achieve their life goals, yet only 56% of employees feel their company provides this support.6

 

Financial wellness programs are highly desired by employees, with 60% stating that they are more likely to stay with an employer that offers a program designed to help them manage their money, according to a survey by Greenwald & Associates.9

 

Plan sponsors can work with financial professionals to do a better job of communicating what types of financial wellness programs they offer, such as workshops or seminars on topics like budgeting and debt management, as well as saving for retirement.

 

The existence of such programs may not be the biggest obstacle, however. Plan participants often need help overcoming the fear and lack of knowledge that may derail them from achieving their retirement goals.

 

Financial professionals can help close that knowledge gap by offering plan sponsors educational tools that help make it easy, such as Capital Group’s ICanRetire® program, which helps spell out the benefits of saving for retirement in clear, jargon-free language designed with participants’ needs in mind.

 

3) Help employees prioritize their retirement savings

 

More than half (55%) of adults ages 26 to 41 say they spend more time planning for vacations than for their retirement, according to a recent Personal Capital survey.10

 

While vacation planning is fun and has a more immediate payoff, using an inflation calculator to show employees how much more groceries are likely to cost when they retire might help them think more seriously about how much money they might need in the future.

 

Likewise, showing employees how much they can earn through the power of compounding can help motivate employees to save more and/or to start saving for retirement, if they haven’t already.

 

At Capital Group, what matters most to us is “improving participant outcomes.” In our over 90-year history of investment management, we have found that the best way to do that is for participants to start saving for retirement today.

 

Participants likely already know they “should” save more for retirement. They want to do the right thing and contribute more – it’s just not a priority for them yet. As the Gillian Welch lyric goes, “I want to do right, but not right now.”

 

Rather than telling participants all the reasons they should save more for retirement, financial professionals and plan sponsors might want to consider asking employees why they might want to make a change and then be quiet. If a person has even a faint desire to do something new in terms of their finances, they are likely to begin explaining their reasons. This technique is described in the Capital Ideas article, “Ask the questions that move clients to action,” and is detailed further in the book “Instant Influence,” by Dr. Michael Pantalon of the Yale School of Medicine.11

 

When employees can envision the type of lifestyle they desire in retirement and discover their own powerful reasons for doing something new, then they are much more likely to take that first step toward making saving for retirement a priority. 

Read important disclosures

headshot-Jonathan_Young2

Jonathan Young is a senior national accounts manager with 34 years of investment industry experience (as of 12/31/2023). He holds a bachelor’s degree in speech communication from Old Dominion University, and he holds the Professional Plan Consultant® designation.

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PRO
1Source: The Future of Workplace Financial Well-Being: 2024 Employer & Employee Perspectives, SoFi at Work survey. Findings were based on a survey conducted by CITE Research in the U.S. between September 28-October 13, 2023, in which 1,500 HR leaders and employees were asked about their financial well-being, financial literacy and financial benefits.
 
2Source: PLANSPONSOR, “2022 Retirement Industry Trends to Follow,” retrieved March 5, 2024.
 
3Source: PwC’s 2023 Employee Financial Wellness Survey, January 2024. (36% of financially stressed employees are likely to look for a new job compared to only 18% of non-financially stressed employees.) PwC conducted an online survey of 3,638 full-time employed U.S. adults across a variety of industries in January 2023.
 
4Source: Employee Benefit News, “How employee financial stress increases healthcare costs,” September 30, 2020.
 
5Source: John Hancock, "Stress, finances, and well-being," 2022. This was an online survey of 3,825 John Hancock plan participants. The survey was conducted from 11/29/22 through 12/14/22 with an average survey length of approximately 18 minutes per respondent. Respondents were located from a list of eligible plan participants provided by John Hancock.
 
62024 BrightPlan Wellness Barometer Survey, 2024. On behalf of BrightPlan, Walr and Workplace Intelligence surveyed 1,400 knowledge workers at companies that have a global presence with 1,000+ employees in the U.S. in January 2024. This included a mix of C-Suite, HR decision-makers and employees in various industries including technology, health care, financial services, education, manufacturing, energy, accounting and government.
 
7Source: Fidelity Investments, “Helping employees save for emergencies,” 2023. Statistics from internal Fidelity analysis of annual transactions per participant from 2018 to 2023.
 
8Source: Greg McKeown, Effortless, Penguin Random House, 2021.
 
9Source: Morgan Stanley and Financial Health Network, Better for Employees, Better for Business: The Case for Employers to Invest in Employee Financial Health, 2019. Data comes from a survey of 1,000 U.S. workers employed full-time for companies with more than 500 employees. The survey was conducted in November and December 2018 by Greenwald & Associates.
 
10Source: Jane Thier, "Millennials are spending more time planning for vacation than retirement. That might be a good thing," Fortune, July 1, 2022.
 
11Source: Michael Pantalon, Ph.D., Instant Influence, Little, Brown and Company, 2011.
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