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.”
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