Financial wellness was a topic of discussion in the “before times,” but now during and in the immediate aftermath of the height of the pandemic, it’s more bread and butter. Financial wellness is now “primetime,” says a retirement professional.
Denise Gumlak, Managing Director, Retirement Strategy and Delivery for Enterprise Iron, asserts that “financial wellness is no longer a buzzword”; rather, it has become a core concern. “Financial wellness is about more than just workers’ wallets—stress over money and security directly impacts workers’ emotional and physical well-being,” she writes, and that includes preparing for retirement.
Looking Ahead
Gumlak cites the quick acceptance of 401(k)s and the rise of their use as a savings vehicle as a sign that financial wellness—and awareness—is more mainstream than it had been. She calls 1996 a “landmark year,” as that was when more than 30 million people actively participated in 401(k) plans that collectively held more than $1 trillion, just 16 years after the enactment of legislation the led to their creation. Twenty-five years later, Gumlak writes, there is more than seven times as much in 401(k) plans and more than $10 trillion in employer-provided defined contribution plans altogether. “The good news is people continue to save in their 401(k) for retirement,” she says.
More Work to Do
But financial wellness is more than retirement readiness, Gumlak suggests. “The not-so-good news is that many are not prepared for unexpected emergencies, as we’ve seen during the pandemic,” she writes. Gumlak notes that many experts advocate setting aside enough to cover three to six months of living expenses, but that more than one-third of the full-time employed Millennials, Gen Xers and Baby Boomers surveyed recently have saved less than $1,000 to cover unexpected expenses.
Moreover, Gumlak observes, a study found that more than half of consumers drew funds from their 401(k) or IRA or borrowed funds against them during the pandemic. Additional research shows that 43% of those surveyed have drawn from their emergency funds.
Recognition
Gumlak notes that researchers found that more than half of all workers they surveyed said their stress about finances is higher than it had been before the pandemic. But there may a silver lining—she notes that the same researchers also report that almost half of the respondents say they now are convinced that they need an emergency fund, while they didn’t think so before.
Employees also are believers in the importance of financial wellness benefits. Gumlak reports that researchers found that 80% consider it important that their employers provide such benefits, and more than 70% consider such benefits “even more critical” than they were before the pandemic.
Gumlak stresses the importance of financial literacy in achieving that wellness. She argues that financial literacy—the knowledge of financial concepts and skills that bring about financial security—is “necessary to achieve financial wellness.”
Employers’ Role
Employers’ recognition of their role in financial wellness is growing, too, Gumlak says. She reports that in another study, 26% of employers offer an emergency account in their retirement plan, and another 19% say it’s likely they will offer one. She cites UPS as an employer that already does; she notes that UPS started an Emergency Savings Initiative for 90,000 employees in October 2020.
Employers can take other steps as well, Gumlak suggests, such as providing resources and guidance concerning:
- planning a budget;
- paying debts;
- establishing emergency savings;
- saving for retirement; and
- paying for college, medical expenses and a home.
Gumlak asserts that retirement professionals are responsible for providing workers with tools, resources and knowledge that will enhance employees’ financial well-being. And she calls on the retirement industry to do more than help employees prepare for retirement and to focus more on financial wellness.
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