According to a 2018 study by Northwestern Mutual, 21 percent of Americans have no retirement savings and an additional 10 percent have less than $5,000 in savings. A third of Baby Boomers currently at, or approaching, retirement age have between zero and $25,000 set aside. The Economic Policy Institute (EPI) paints an even bleaker picture, reporting that “nearly half of families have no retirement account savings at all.”
Most Americans are far from the levels necessary for a healthy retirement. This data makes a recent GOBankingRates savings survey response even more interesting: “The number one thing Americans are saving for is retirement.” Hard-working Americans want to save—it is our responsibility to put them in a position to do it
Employers are taking a more active role by implementing financial wellness programs to assist employees with their current financial challenges. The real value comes from creating behavioral change that will lead to long-term financial stability. Employees want to save. Employers want to help. Where is the disconnect?
Simple investment advice or siloed solutions may help in the near-term, but that alone will not solve the inherent problem. The adage is absolutely true: Give a person a fish and he’ll eat for a day. Teach him to fish and he will eat for a lifetime.
FinFit conducted a study over the past two years on 30,000 members participating in a financial wellness platform with the goal of creating behavioral change. The study grouped members into three categories:
Healthy: Individuals exhibit positive financial behaviors that will allow them to be resilient and on track for long-term financial success
Coping: Individuals exhibit some positive behaviors but also experience challenges that require significant behavioral change to reach long-term success
Vulnerable: Individuals exhibit poor financial behaviors, are struggling and require immediate assistance and behavioral change to adjust course for long-term success
Here are some findings that demonstrate the issue is largely behavioral, not solely a matter of resources:
- 31 percent of the vulnerable participants make over $50,000 per year
- 27 percent of the vulnerable participants are over the age of 45
- 88 percent of the vulnerable participants recognize they have too much debt
- 38 percent of the vulnerable participants believe their most important financial goal in the next 12 months is to take a vacation
With hundreds of different data points on each member, the data quickly demonstrates that unhealthy financial habits are not isolated within the low income, young, resource-deprived community. The key to long-term financial security is not to simply acquire more income/assets; the key is to change and improve upon the daily financial behaviors of these employees.