Financial Wellness: Prescription with Retirement Side Effects

By John Iekel • February 02, 2018 • 0 Comments
A recent paper touches on where retirement readiness fits into the financial wellness equation, and it’s not just in the obvious ways.

In “The Power of the Wellness Effect: Seeing the Real Value of Employee Financial Health,” Prudential Retirement President and CEO Phil Waldek and Prudential Group Insurance President Jamie Kalamarides cite sobering statistics to bolster the case for financial wellness benefits — for instance, a 2016 report in Forbes that more than 60% of Americans would not be able to meet a $500 emergency, and a 2016 Prudential survey in which 22% of individual respondents said they consider themselves financially secure. “These trends, while problematic today, have even more dire consequences for the future, as today’s financial shortfalls impede individuals’ ability to save adequately for retirement and protect themselves against unexpected life events,” they write.

Waldek and Kalamarides note that “individuals often struggle with making important financial decisions on their own, or entrusting others to make decisions on their behalf” and that employees have learned to regard their employers as “trusted partners who can help employees achieve financial wellness.” This matters, they assert, since it emphasizes how important the employers’ role is. “Employer-sponsored benefit programs have long played a role in helping individuals prepare for retirement and obtain protection against unexpected life events,” they note, adding that Prudential’s research shows that individuals are more apt to take advantage of financial counseling and tools if their employer offers them.

Financial counseling and tools, say Waldek and Kalamarides, should not just include services and features that benefit employees’ short-term financial health — they also should include retirement products and services and contact with retirement service providers.

Waldek and Kalamarides suggest that financial wellness programs are good not only for employees, but also for employers. In a nutshell, they say, this is because:

  • employees who are financially healthy are more productive;

  • helping employees to be financially healthy can enhance an employer’s ability to attract and retain employees;

  • employees with fewer financial stress factors may be healthier and less likely to be absent, lowering an employer’s health care expenses; and

  • financial wellness programs can complement and enhance the worth and attractiveness of employer-provided retirement plans.

There is an additional benefit to employers, say Waldek and Kalamarides: They argue that it can help reduce the incidence of employees delaying retirement. That’s not an insignificant phenomenon, they say, citing a study by PricewaterhouseCoopers in which they found that 44% of employees indicated in 2016 that they will be retiring later than they had originally planned.

Delayed retirement, Waldek and Kalamarides argue, can have some detrimental effects on an employer, including discouraging younger employees by restricting upward mobility for them and the need for employers to pay higher salaries for a longer amount of time than they would if younger employees filled their positions. They say that a comparison of workforce costs in general with the expected incremental costs of delayed retirement as a percentage of workforce costs “demonstrates that the cost of delayed retirement is significant relative top national expenditures incurred for other workforce costs.”

Waldek and Kalamarides add that financial wellness programs’ impact on curbing delayed retirements will be good for employees as well, since they could enhance employees’ financial security and their readiness to retire.

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