COVID-19 Strained Participant Financial Wellness - Can Employers Help Them Recover?

Participants’ confidence in their financial outlook has been relatively low for years. More recently, financial challenges from the COVID-19 crisis have made the situation for many even more uncertain. That’s why plan sponsors—and employers in general—now have an opportunity to connect with employees on financial topics that span more than just retirement planning.

Employees Are Uneasy About Financial Well-Being

Before tackling engagement, plan sponsors should first revisit what they’re solving for. Although financial unwellness is a longstanding problem, COVID-19’s recent impact on financial well-being is especially telling in how it changed the retirement planning course for many. Nearly 30% of plan participants in our recent survey, Inside the Minds of Plan Participants, said the pandemic changed how and when they’ll retire (Display, left). And over the past year, 17% of those surveyed tapped into their retirement savings to pay for living expenses—many more turned to emergency funds or credit cards to make ends meet (Display, right). We believe our findings suggest that while people tapped credit cards and emergency savings as their first line of defense, if the pandemic drags on, more retirement savings could be leveraged as those other assets run dry.

Retirement Confidence Linked to Broader Financial Well-Being

Financial wellness challenges are weighing down participants’ confidence in their retirement outlook. Since AB began surveying participants in 2005, only about one in three (29%), on average, have felt either “confident” or “very confident” about their retirement prospects. This year’s survey found a 35% confidence level—better than the long-term average but a big step down from 2018, when nearly half (47%) seemed confident about retirement.

Looking more broadly, life clearly poses a sizable financial challenge for many people. When asked to describe their financial life overall, 31% said they can make ends meet, but still struggle, and about one in 10 said they’re barely getting by (Display).

With so many moving parts to financial wellness today, securing a comfortable retirement can no longer be pursued in a vacuum—it depends on too many other financial underpinnings in life. Credit card and college loan debt, insurance premiums, healthcare costs, taxes—even basics like budgeting—all come into play with individuals’ financial well-being. Participants increasingly want and need employers to help them connect those dots—and financial wellness programs may be just the tool for the job.

A Win-Win for Participants and Sponsors Alike

Although widely adopted by larger employers, financial wellness programs still haven’t reached most of the American workforce. But workplaces that do have them report a strong positive impact. In our recent survey of plan sponsors, employers with these programs report that their employees are more engaged and productive, which we believe helps improve their financial knowledge, confidence and the likelihood that they’ll retire when they want (Display).