Few Americans Are Ready for Retirement: Can Financial Wellness Programs Help?

Davidson explains that each innovation has been touted as the solution to the problem — and these have had an effect — but getting American workers to save enough to retire comfortably has more challenging than originally expected.

Financial Finesse also points out that a recent survey conducted by the Employee Benefit Research Institute and Greenwald & Associates, finds 70% of American workers believe debt negatively affects their ability to save for retirement. And 55% of workers say they are unable to save for retirement and save for other financial goals at the same time.

"Even the best retirement plans can't compensate for an employee who simply is unable to save sufficiently due to high levels of student loan debt, rising health care expenses, and a society that places a premium on 'living your best life' with experiences that are largely out of reach for most Americans," the study's co-author Greg Ward, director of the Financial Wellness Think Tank, said in the statement. "The reality is that most employees need financial coaching to overcome these obstacles."

According to Davidson, financial wellness programs are rapidly expanding, with more than 300 firms putting themselves forward as providers. These programs are a fast-growing employee benefit, and many employers consider them an imperative from a social mission perspective.

Financial Finesse pointed to a poll done by Alight Solutions in which 82% of employers state that offering a financial wellbeing program is "the right thing to do." Plus, a MetLife study of employee benefit trends reveals that 53% of employees believe their employers have a responsibility for their financial well being. "Companies that ignore this issue put themselves at a distinct disadvantage when it comes to recruiting and retaining talent," Davidson said.

Pension Problems Meanwhile, U.S. corporate defined benefit (DB) plans probably would like to forget this past winter, according to new research from Cerulli Associates. After tens of billions of contributions and higher discount rates improving funded status for much of 2018, volatility negatively affected corporate DB plans in the last days of the year.

"Significant volatility in financial assets and interest rates whipsawed these institutions just as underfunding concerns were beginning to ease early in the fourth quarter of 2018," Cerulli states.

Through the first three quarters of 2018, the funded status of the average corporate DB plan steadily improved from a more than 85% funded ratio to the low-to-mid 90s in September, according to Cerulli. This is largely because many plans — especially larger ones — took steps to de-risk pension liabilities by freezing benefit accruals and/or closing to new participants after facing significant pressure to immunize the volatility of liabilities on corporate balance sheets and income statements.

Then, financial market volatility in late 2018 — brought on largely by concerns of slowing global growth — changed the game "seemingly overnight," according to Cerulli. The Milliman Pension Funding Index says that the November-to-December experienced the largest percentage-point decline for the year, in many cases wiping out 2018 percentage point improvements in funded ratios in one month.

Then, in the first few months of 2019, as the U.S. Federal Reserve Board appeared to change track and hold off on further increases in short-term interest rates, financial assets rebounded and volatility largely became a positive. Despite the bounce back, Cerulli finds that these corporate DB plans are feeling shell-shocked.

"Recalling the 2007–2008 global financial crisis losses (which, on the eve of the crisis, was the last time corporate pension plans were fully funded), CIOs tell Cerulli that their companies cannot stomach such volatility again," the research states.

Reach Michael S. Fischer at [email protected]. Emily Zulz is a former staff writer for ThinkAdvisor.com.