12 July 2020

Helping Employees Retire Sooner

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Large employers who want to save on their budgets should expend more effort on helping their employees better prepare for retirement.

That’s according to new research from Financial Finesse’s Financial Wellness Think Tank, which finds that for a 50,000-employee company, an employer could save as much as $97 million annually.

Quantifying such savings—achieved by improvements to employee financial wellness that cut the costs of delayed retirements—lays it out in black and white (and green) for employers.

Financial Finesse’s research cites a 2017 Prudential study, that showed that the cost to the company of a one-year delay in retirement exceeded $50,000 per employee. Retirement-eligible employees cost more in wages and benefits because of their longer tenure, had increased absenteeism and lower productivity.

The study also finds that the more financially well off employees are, the more the average retirement age falls. Repeated engagement with financial wellness programs that bring about an increase in financial health from 4.0 to 6.0 boosts employee retirement plan contribution rates by a factor of 38% from original rates.

That in turn causes a drop in the projected average workforce age at which employees can retire and replace 80% of their income—from 68.95 years to 66.96 years.

And that reduction in retirement ages occurs across all career stages, the report finds, with employees under 35 experiencing the largest drop (2.67 years) and older employees 1 year.

Even if improvements in employee financial wellness are more modest, the retirement plan contribution rate still rises by 17.85%, cutting the average projected retirement age by a year.

Multiple interactions/approaches to boosting financial wellness add up, the report finds, so employers should not stop at a single method for making their employees financially healthier. Tools can include a retirement calculator, auto enrollment, auto escalation, and one-on-one financial coaching.

“Financial wellness programs that include financial coaching help employees break through blocks to retirement savings by tackling debt and student loans, managing cash flow and navigating important life goals like marriage, parenthood and home ownership,” Greg Ward, Think Tank director and CFP, is quoted saying.

Ward adds, “Results are cumulative and interact with each other, so the longer a company has a holistic financial wellness benefit in place, the more workforce financial wellness shifts.”

Click here for the original article.

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