Don’t Worry (About Money), Be Happy (At Work)

Employee confidence in their ability to retire comfortably may depend in large part on their age—or more specifically, their generation. Helping employees worry less about money can make them happier at work.

We talk a lot about retirement readiness and educating participants because it’s an important topic. A 2016 survey by the International Federation of Employee Benefit Plans (IFEBP) found retirement confidence highest among Baby Boomers—54% said they are likely to retire as planned with adequate savings.

But for those of younger generations—Generation X and Millennials—the drop-off in retirement confidence is significant. Only 12% of Gen X and 8% of Millennials believe they will have enough savings accumulated when retirement comes, according to the same IFEBP survey.

A lack of retirement confidence can contribute to feelings of stress and anxiety. Employers should pay attention because the stress workers are feeling outside of work can affect their on-the-job performance.

Employers are in a unique position to help their employees combat financial stress and build confidence through financial education and literacy programs. Nearly half of employers surveyed by the IFEBP offer employee education on retirement security or benefit programs. But only 18% customize their communication to workers based on age.

This is a major oversight because retirement planning needs and concerns can vary widely among different generations. To make financial literacy programs more effective, employers can fine-tune their communications and educational content to address each generation’s specific retirement concerns.

Baby Boomers: The Times Are A-Changing Again

Compared to younger generations, Baby Boomers have had more time to save and invest for retirement. They also have benefited from the extended bull markets for stocks and bonds throughout their working years.

So it’s no surprise to find Baby Boomers feeling more prepared and confident about retirement, relative to Generation X and Millennials. That doesn’t mean they don’t have their own pressing concerns about their financial future.

Younger generations say their biggest retirement concern is running out of money, according to a 2016 survey by Franklin Templeton Investments. But for Baby Boomers, another concern rises to the top—how to pay for health and medical care in retirement.

Of course, these two concerns are related—higher health care costs can devour retiree nest eggs and deplete their savings. But as workers get closer to retirement, their concerns often become more specific, such as a focus on covering health care costs. Financial education should become more specific as well.

Generation X: A Long Shadow Looms

The group that has always lived in the Baby Boomer’s shadow is looking ahead to a dark financial future. Research by J.P. Morgan Asset Management found a wide gap in savings between current Gen X households and Baby Boomer households of 25 years ago (when they were the same age as Generation X today.)

For example, median household net worth of Baby Boomers, when they were ages 35-44 (back in 1989), was $102,000. Today Generation X households in the same age segment (35-44) have a median net worth of just $47,000—less than half of what Baby Boomers averaged 25 years ago.

Retirement anxiety is high among Generation X savers, but it peaks for those between the ages of 45-54, according to Franklin Templeton. With some of these Gen Xers just 11 years away from the typical retirement age, they don’t have much time to build retirement savings or confidence.

Financial education for this generation should focus on increasing savings rates and set realistic expectations for future growth and changes in lifestyle.

Millennials: Who Wants to Be a Millionaire? (But Won’t!)

The youngest age cohort in the workforce now is in the best and worst situations—they have a lot of time to invest and grow their savings for retirement, but they are also weighed down heavily by debt that restricts their ability to save.

These restrictions are dimming their outlooks for the future. A Wells Fargo survey in 2016 found a majority of Millennials believes they will never become millionaires.

Millennials aren’t exactly helping their cause through their investment habits—57% of whom haven’t even started saving for retirement, according to Franklin Templeton.

Those who are saving are likely approaching the financial markets with considerable caution: 59% of Millennials told Wells Fargo “the current economic climate makes them uncomfortable about investing” and 52% are concerned market volatility will wipe out their retirement savings.

Millennials are likely in greatest need of basic financial education, particularly about the risks of investing (including the risks of not investing) and the benefits of compounding growth over time.

Less Stress Makes Happier Employees

Employers and retirement plan sponsors should invest in improving financial literacy for their employees. When workers have enough knowledge to manage their personal finances, they’re better able to put their financial plans in order and lower stress throughout their lives.

And less financial stress can help employees become happier and more productive at work. A survey by Lockton Retirement Services found high-to-moderate stress levels among 90% of U.S. workers, including 1 in 5 who feel extreme levels of stress in their lives. Much of this stress stems from financial concerns:

• 2 in 5 are struggling to pay credit card debt
• 1 in 5 are financially supporting their adult children or elderly parents
• 38% have just 3 months of savings on hand to cover living expenses.

Stressed workers are more likely to use sick time even when they are not ill and take prescription medicine to treat chronic illnesses. Those are direct and indirect costs businesses eventually bear.

The Lockton survey also revealed that workers rate help with financial plans, meetings with financial advisors and investment education as most helpful in decreasing their financial concerns.

It’s apparent that financial literacy is a gap that individuals need to fill. Employers can often help because of their role as sponsors of their workplace retirement plans. Closing this knowledge gap and helping workers feel more confident and less stressed about their financial lives can benefit employers and employees alike.