Go beyond a basic 401(k)

Go beyond a basic 401(k)

Give your employees more than just a 401(k), join the movement.

5 min read

How Employee Financial Wellness Impacts Performance

Ben Werdmuller
January 22, 2018
How Employee Financial Wellness Impacts Performance
Table of contents

If your small business offers a 401(k), give yourself a pat on the back. You are building a retirement nest egg and providing your employees the chance to do the same. But some employees may be reluctant to sock money away for years because they are concerned about their finances today. These employees may be paying off student loans, credit card debt, or simply having trouble making ends meet. By some estimates, over two-thirds of Americans aren’t saving for retirement.

As more plan sponsors are becoming aware of their employees’ financial stresses (and how it impacts workplace performance), more 401(k) plans are providing resources to help. Such guidance is called a “financial wellness” benefit. And just like the company 401(k), helping employees in this fashion can be a great investment.

According to a report by the Consumer Financial Protection Bureau, financial wellness benefits can return from $1 to $3 for every dollar invested. That’s because personal financial stresses can creep into the workplace as employees wrestle with payment deadlines, overdue bills and mortgage refinancing.

Financially stressed employees

The CFPB report found that financial concerns were the most common cause of stress for seven of ten workers. This stress may be triggered by burdensome credit card debt, hefty student loan balances, or even an emergency car repair.

Unexpected expenses can throw a particularly nasty monkey wrench into employees’ financial affairs. According to PwC, who regularly publishes reports on employee financial wellness, employees’ top rated financial concern is having too little saved for unexpected expenses. That makes perfect sense given that a Bankrate survey found that 63% of Americans can’t access $500 for an emergency expense.

Stressors all around

The latest PwC Employee Financial Wellness Survey incorporated the views of 1,600 adults employed full-time. Members across all generations in this group indicated that “financial wellness” meant “freedom from financial stress and debt, enjoying life, and being prepared for emergencies.” But for many, financial wellness is a goal not a current condition.

There are many reasons for financial worries, among them student loan debt. A whopping 40% of Millennials and 31% of Gen X employees reported student loans outstanding. More than 40% of those in each group said that the loans are hampering their ability to meet other financial goals. And employees with student loans more likely to use credit cards for monthly necessities.

As we all know, it doesn’t take long for credit card debt to pile up. Perhaps it’s no surprise then that significant numbers of Boomers, Millennials and Gen Xers found it difficult to make their minimum credit card payment each month (36%, 39% and 42% respectively). Meanwhile, about one-third of employees are using credit cards for monthly necessities they otherwise couldn’t afford. However, this particular financial squeeze is heavily skewed toward Millennials and Gen Xers. And despite the growing economy, Millennials and Gen Xers increased reliance on credit cards in 2017.

Financial pressures are such that 44% of employees thought that eventually they would need to use money from a retirement account for non-retirement expenses. In fact, around one-third of Millennials and Gen Xers have already taken money out at least some money from their retirement plans.

Baby Boomers have their own worries. PwC found that only 17% of the group had managed to put away at least $500,000 in retirement savings.

No doubt there are reams of white papers on why so many workers are under financial stress. But we think it’s notable that just five states require that high school students take a personal finance class.  

How employee financial wellness impacts your bottom-line

More companies are learning that when employees are under financial stress it can impact their productivity on the job. Almost one in three employees reports that financial issues have been a distraction at work. And almost half of those spend three hours or more each week dealing with personal financial issues while on the job.

After years of producing the Financial Wellness Survey, Kent Allison, PwC Partners and National Practice Leader concludes in the 2017 publication that:

“Stressed employees are found to be less productive, take time off from work to deal with their finances, and are more likely to cite health issues caused by financial stress. These findings are concerning and potentially significant for companies looking to evaluate the return on investment of a financial wellness program.”

This sentiment supports the CFPB report’s conclusion that financial wellness programs can reduce absenteeism and even worker disability costs. After all, money problems can be stressful enough to lead to poor health.

Finding a financial wellness program that works for your company

Some large companies can take on the task of educating employees on personal finance matters. Smaller companies may have neither the time nor resources to pull off such a task. However, many 401(k) providers do have the resources to address the financial concerns of a plan’s participants.

At ForUsAll, we have taken a high tech and a human approach to financial wellness.  

The high tech experience is driven by DAVE, our virtual advisor. DAVE helps get your employees enrolled into the plan and explains their options. DAVE also keeps employees engaged with texts and emails, and even explains the basics of investing in a 401(k) retirement plan.

But robots don’t have all the answers when it comes to personal finance. That’s why ForUsAll offers plan participants access to our human advisors. Your employees’ financial wellness matters, and while many online 401(k) providers have found ways to “robo” the investment decisions, your employees probably will still have lots of financial questions. So in addition to our virtual advisor, DAVE, ForUsAll’s investment advisor representatives are available to answer questions.

Employees may ask for help deciding if they should pay off student debt or invest in your company’s retirement plan. Or which credit card should they try to pay down, or how much should they try to save for an emergency like a car repair or illness.

Integrating financial wellness with the company 401(k) makes sense from a lot of angles. Most importantly, the quicker your employees improve their personal finances, the sooner they can save meaningful amounts of their salary for retirement.

Financially healthy employees not only impact your bottom-line, they also result in a healthier 401(k) because higher participation rates and salary deferrals can help your plan pass key non-discrimination tests.

Talk with us now to see if a 401(k) plan that can boost your employees’ financial wellness makes sense for your small business.

Go beyond a basic 401(k)
Give your employees more than just a 401(k), join the movement.
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Ben Werdmuller
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This material has been prepared for informational and educational purposes only and should not be construed as a recommendation by ForUsAll, Inc., its affiliates or employees (collectively, “ForUsAll”)  to activate a cryptocurrency window or invest in crypto.  Investing in crypto can be risky and investors must be able to afford to lose their entire investment.  You should consult with your own advisers before activating a cryptocurrency window or investing in crypto.  ForUsAll does not provide legal, tax, or accounting advice. Please refer to your Plan's fee disclosure for more details.© 2023 ForUsAll, Inc. All rights reserved.
1 Schwab 2022 401(k) Participant Study - Gen Z/Millenial Focus, October 2022.
2 As of 12/31/2022. Employees include both current employees and terminated participants with a balance.
3 "Morgan Stanley At Work: The Value of a Financial Advisor" Morgan Stanley, March 2022.
4 Sarah Britton was a client when she provided this testimonial through an independent third party review website. She received no compensation for her remarks. There are no known conflicts of interest in the provision of her comments related to the services provided.