A deep dive into financial wellness

Workers are feeling more confident financially, with 47% rating themselves “financially well,” compared to 42% in 2023, according to Bank of America survey results. But they remain concerned about inflation and the cost of living. Workers also cited better compensation as the top factor that could lure them away from their current jobs.

The financial firm also found gaps in workers’ experiences: Men said they were more financially secure, more confident in their retirement savings and more amenable to in-office work. But slightly more women said they felt better about their career outlook. Bank of America surveyed 955 employees and 804 employers over the winter for its report.

What employees say they most value seems to fluctuate with trends in the economy and culture. While inflation has cooled somewhat from its historic peak in 2022, workers are still feeling the impact. More than half of U.S. adults told The Harris Poll and the American Staffing Association in January that their paychecks were still not keeping up with inflation, and nearly 4 in 10 said they were in an even more stressful situation than the year before. 

While Bank of America found feelings of financial wellness appear to be trending upward, the numbers still aren’t stellar, with fewer than half of workers reporting their financial wellness was good or excellent. Slightly over half of men reported high financial well-being, while women lagged behind at 36%. 

But employers shouldn’t worry too much about employees leaving for new jobs; Bank of America also found 70% of workers plan to stay at their company for the next year, reflecting a trend that some are calling “the big stay.” 

What may be more surprising is why employees said they’d stay — a good work/life balance topped the list, with 60% saying they’d stay for this reason, compared to 53% for compensation — as well as the additional benefit employees say they most want: a four-day workweek. The numbers suggest that while good compensation is a baseline need, employees deeply value their personal time and, beyond a certain point, may be unwilling to trade it for more money. 

The push for a four-day workweek has gained steam in recent years. Last August, three-quarters of respondents to a Resume Builder survey said they’d switch jobs for a four-day workweek and 1 in 3 said they’d take a pay cut. The benefit is still exceedingly rare, however; an Indeed analysis found that while more job postings mention four-day workweeks, that number only rose from 0.1% in September 2019 to 0.3% in September 2023. 

With the three-year pandemic reprieve from federal student loan repayments now well in the rear-view mirror, many employees are once again facing a daunting choice: focus on paying off student loans or saving for retirement. 

As of January 1 this year, employers have a new way to help employees meet these challenges.

That new way is a function of the Secure 2.0 Act, a federal law that allows employers to make contributions to employees' retirement plans based on qualified student loan payments. 

Employers often match employee contributions to 401(k)s and 403(b)s. Now, employers "match" when their employees pay down their student debt. 

The heavy toll of student loan debt

There's certainly a need for innovative ways to address the nation's student debt crisis. More than 43 million Americans carry student loan debt, which totaled $1.6 trillion in the fourth quarter of 2023. The average debt load among all borrowers last year was nearly $38,000. 

And those obligations exact a toll. More than nine in ten borrowers between the ages of 18 and 39 report that financial stress impacts their physical and mental well-being, according to a survey we conducted with Morning Consult. More than 80% said they were worried about resuming payments when the pause on federal student loans ended. 

This predicament coincides with a similar crisis in retirement savings. According to a report published in February by the Senate Health, Education, Labor and Pensions Committee, the number of workers at risk of a "financially insecure retirement" has risen from one in three to nearly 50% in the past 40 years. "Roughly 57 million Americans do not have a way to save for retirement easily and automatically out of their regular paycheck," the committee found. 

Even many people with access to workplace retirement savings plans do not use them. Just 50% of eligible workers participate in employer-sponsored 401(k)s.

Student debt is a reason why. In our survey, 46% of respondents said paying their student loans hindered their ability to save for retirement. Some 86% reported reducing contributions to their 401(k)s, while 55% stopped contributing altogether. More than four in ten made early withdrawals to pay down debt and other expenses.

Pioneering a solution

At Abbott, we've seen our employees grapple with these challenges. In response, we launched a program called Freedom 2 Save in 2018, which helped inspire the student loan provision of Secure 2.0.

Under Freedom 2 Save, 401(k)-eligible workers at Abbott who apply 2% or more of their salary toward their student loans receive an annual employer contribution of 5% of their salary to their 401(k) — regardless of whether they contribute to their workplace retirement account themselves. 

Because Freedom 2 Save is the first of its kind, we sought a ruling from the IRS on the basic structure of the program. But thanks to Secure 2.0, it’s now easier for employers that offer 401(k)s and 403(b)s to implement programs like Freedom 2 Save on their own. 

Our program has helped us attract and retain top talent. Employees report that Freedom 2 Save makes them feel seen as people, not just workers. Those who participate in Freedom 2 Save are 19% more likely to stay with us.

This approach will eventually become a routine element of employee compensation. Some 54% of young adults with student loans have said such a benefit would be a key factor when considering competing job offers.

In fact, a handful of companies, including Chipotle and Verizon, have already launched programs similar to Freedom 2 Save. 

Taking action for your own employees

Rolling out a program in line with Secure 2.0's flexibilities takes time. Employee benefits leaders should plan for six months to a year — and may find our experience designing Freedom 2 Save helpful in developing their own program.

First, consider your strategy and resources. How does the program fit into your organization's approach to financial wellness? Determine the cost to create and manage the program over time, including not only the "match" costs but also administrative costs and what it will take to educate employees about the program. 

Second, it's crucial that employers communicate consistently, clearly and concisely with their various target audiences across multiple platforms. At Abbott, we send regular emails to our employees explaining how Freedom 2 Save works and how to enroll in the program.

We also learned that person-to-person interactions go a long way toward increasing employee engagement and comfort with the program. Many of our employees find it valuable to discuss their options one-on-one with our HR team. They also use an online calculator tool we created to help them better understand how Freedom 2 Save could benefit them.

Secure 2.0 plans are a big win for employers and employees alike. They deserve serious consideration for inclusion in any employer's compensation package.

More than half of employers said they plan to address the impact of social determinants of health — social and economic conditions that affect a person’s ability to be healthy — on personal well-being in the next three to five years, according to the results of a survey by Business Group on Health and Fidelity Investments. 

Of the 160 employer respondents, more than three-quarters reported providing family-forming benefits and reproductive support in 2024, and 86% of employers said they planned to offer the benefit next year, per BGH. 

Roughly 6 in 10 employers said their well-being strategy is consistent globally, and 18% plan to develop one soon. The challenge, according to 70% of respondents, was that employee needs are not universal in each country where they operate.

Employers increasingly have been turning to well-being and other nontraditional benefits to attract and retain workers, including benefits that address the social determinants of health, such as financial literacy programs and housing assistance. 

The 2023-2024 Aflac WorkForces Report found that 66% of employees are less likely to look for a new job if they feel like their company supports their well-being. 

“Addressing social determinants of health may soon be a key aspect of well-being design,” Ellen Kelsay, president and CEO of Business Group on Health, said in a statement. “By supporting initiatives that reduce employee cost-sharing or provide child care support and flexibility, for instance, employers enable individuals and their families to boost their overall well-being and achieve other positive outcomes.” 

Some employers are tackling what are known as the social determinants of work: the factors that affect how an employee can show up in a healthy way at work. That can look like caregiving or child care benefits, therapy services or transportation assistance. 

These types of nontraditional benefits are an area of opportunity for employers, according to HR Dive’s 2024 Identity of HR survey. More than half of respondents said remote and hybrid work programs were part of their talent strategies last year. Other benefits that saw an uptake included programs addressing mental health, educational attainment and commuting.

Only 21% of those in the middle class in the U.S. feel very confident they will be able to fully retire or maintain a comfortable lifestyle when they do so, according to the results of a survey conducted by nonprofit Transamerica Center for Retirement Studies and Transamerica Institute. The survey defined the middle class as people with an annual household income between $50,000 and $199,999.

Those surveyed said they faced competing financial priorities, including paying off debt (59%), saving for retirement (49%), developing an emergency savings (42%), saving for a major purchase or life event (31%) and covering basic living expenses (31%). 

Forty percent of those in the U.S. middle class said their greatest retirement fear is outliving their savings and investments. Of those surveyed, only 24% strongly agreed that they have a large enough nest egg.

“America’s middle class is navigating the turbulent post-pandemic economy and high rates of inflation. They are focused on their health and financial well-being, but many are at risk of not achieving a financially secure retirement,” Catherine Collinson, CEO and president of Transamerica Institute and TCRS, said in a statement. 

Nearly half of those in the middle class who haven’t yet retired expect to work longer than the typical retirement age, 52% plan to keep working after retirement, and 15% don’t plan to retire, according to the survey results. However, the actual median age of middle class retirees is 62, and half retired earlier than they expected, the report said. 

A recent Employee Benefit Research Institute report found that older workers now make up a greater share of the workforce, and the share of those who are “prime working age” (ages 25-64) has dropped since the mid-1990s. 

A separate EBRI report found that adults 65 and older made up 29.5% of the workforce in 2023, compared to an estimated 23% in 2000.

When selecting an employer in 2024, workers’ top priorities now include an attractive salary and benefits, work/life balance, good training, equity and job security, according to a report from Randstad.

While compensation remains the top desirable trait in employer value propositions, equity has become a much more significant factor, the report found.

“It’s clear that the American workforce is entering a new era where equity and longer-term financial security are moving to the forefront of employee priorities,” Marc-Etienne Julien, chief executive of Randstad North America, said in a statement.

“This shift is a powerful reminder that organizations must look beyond the traditional salary offer to attract and retain top talent,” he said. “This means embracing more inclusive compensation models and fostering workplaces where everyone, regardless of background or role, can see a future for themselves.”

In a survey of more than 5,000 U.S. adults, job switching behavior appears to be on the rise, with a 2% increase in job changes during the second half of 2023 and a predicted 3% jump in the next six months of 2024. The increase suggests a “robust trend toward mobility,” according to the report, particularly among Gen Z employees.

Gender and age disparities in compensation also seem prevalent. Women and older employees, specifically baby boomers, reported fewer instances of equitable compensation and benefits satisfaction. Employers may need tailored strategies to bridge this gap, the report found.

Although more companies say they’re striving for pay equity and transparency, about 34% still don’t have a pay equity strategy in place, according to a beqom survey. More than half of compensation decision-makers said they doubt their company meets global standards, and 45% said their approach to pay equity hurts their ability to attract talent.

Pay structures are beginning to change to meet equity and transparency goals, according to a Payscale report. However, while organizations have become more transparent, they still only tend to disclose data to individual employees and only when required to do so, the report found.

Employees may see an immediate pay boost by job hopping, but doing so may also significantly decrease their retirement savings in the long term, according to a Vanguard report.

The investment firm found that the median job switcher sees a 10% increase in pay as well as a slight percentage point decline in their retirement savings rate after taking a new job. Vanguard analysts said this is due to the design of most employer-sponsored 401(k) plans, whose default savings rates differ from employer to employer and which do not always automatically enroll new employees.

Vanguard gave the example of an employee who earns $60,000 annually at the start of her career and switches jobs eight times in her lifetime — a total of nine jobs held overall, which Vanguard said is the typical amount for U.S. workers — finding that the employee’s potential lost retirement savings could be as much as $300,000.

“Put differently, [the employee] would have a 41% smaller retirement nest egg and be able to fund an estimated six fewer years of retirement spending than if she had remained with one employer,” Vanguard analysts said.

Those calculations assume the employee would have a stable career had she not changed jobs or, if she had changed jobs, that each employer she worked for would have a default retirement plan savings rate of 3%.

Why retirement woes are HR’s problem

Previously, the company said in a 2023 report that overall retirement saving participation increased between 2006 and 2021, with an especially large jump among Generation Z workers.

Despite that finding, however, retirement confidence remains low for U.S. workers generally. An August Transamerica survey found that only 21% of middle class Americans felt very confident that they would be able to retire fully or maintain a comfortable lifestyle in retirement. A separate poll by Economist Impact and Nuveen found that more than half of workers at mid- and large-sized U.S. companies lacked confidence in their ability to retire between ages 65 and 67.

Employee financial stress is an HR concern, given that 1 in 4 employees surveyed in a 2024 SoFi report said that stress reduces their productivity and confidence on the job. The same report found that 55% of HR leaders recognized the impact financial stress has on employee mental health, while 2 out of 5 said the same of employee productivity and focus.

Moreover, offering retirement assistance could aid retention goals. A 2022 study by Morgan Stanley at Work found that 94% of employees said retirement planning assistance from financial professionals is a priority when choosing where to work.

How employers can help

One solution for employers is to increase the default rate at which enrollees begin plan participation, Vanguard said. In the above example, the analysts found that increasing the rate from 3% to 6% would leave a savings gap of just $70,000. But not all participants may be able to afford a higher savings rate, meaning employers might have to offer “emergency expense withdrawals or other liquidity features” to prevent workers from choosing not to enroll.

Two additional ideas would require policy changes, Vanguard said, because “existing laws require automatic contribution rates to uniformly apply to all employees after giving them the required notice.”

The first involves setting default savings rates based on an enrolled employee’s age, as workers with longer tenure at a previous employer “tend to be older and experience a greater savings slowdown when switching jobs,” Vanguard said. The second would be to default to the rate that the employee had in their previous employer’s plan, if that rate is higher than the employer’s current default rate.

At an HR Dive virtual event, Lisa Gomez, assistant secretary of labor for employee benefits security at the U.S. Department of Labor, said that employers should consider designing flexible retirement plans that allow employees to address financial hardships when they arise. Gomez also pointed to employers’ role in educating employees on how to save and how to manage their retirement plans.

Four in 10 U.S. workers surveyed by the American Staffing Association said their debt — including mortgages, credit card debt, student loans and medical debt — was influencing their career decisions, according to the results.

Millennial workers were more likely than any other generation to say debt was affecting those choices.

Notably, nearly 3 in 4 workers surveyed said they have debt of some kind. “Increased levels of personal debt results in unhealthy levels of stress, damaged credit scores, limited mobility in the job market, reduced quality of life, and reduced prospects for the future for a growing number of individuals and their families,” Richard Wahlquist, CEO of ASA, said in a statement.

Financial stress can put incredible strain on workers’ productivity and health, various studies have shown.

According to a report from PNC Bank earlier this year, 3 in 5 U.S. workers said they lived paycheck to paycheck, and 78% of employers surveyed said their workers were financially stressed — a number that has grown since 2023.

On top of that, 43% of workers with employer-sponsored insurance carry some kind of medical debt, according to healthcare advocacy collective Goodroot. Younger workers were more likely to carry medical debt, researchers found, which aligns with ASA’s finding that millennials were most likely to carry some sort of debt.

Employers do have options to help workers — including a relatively new federal law that allows employers to make contributions to employees’ retirement plans based on qualified student loan payments. 

Abbott’s executive vice president of human resources explained in an HR Dive op-ed that her company’s program, Freedom 2 Save, helps workers focus on paying down debts: If a worker applies 2% or more of their salary to a student loan, they can receive “an annual employer contribution of 5% of their salary to their 401(k) — regardless of whether they contribute to their workplace retirement account themselves,” she wrote.