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Actions Planning for Retirement: Financial Wellness Programs Can Help
Key Takeaways
- Broadening access to workplace retirement savings plans can positively impact retirement readiness.
- Employers can help employees better prepare for retirement by offering financial wellness programs.
- Increasing savings rates, working longer, or a combo of the two can improve retirement outcomes.
About 50% of working families are at risk of not being able to maintain their standard of living once they retire. What can be done to improve individuals’ overall financial well-being and prospects for a secure retirement?
Having access to a workplace retirement plan has a big impact on retirement readiness, according to the latest analysis from the Center for Retirement Research at Boston College (CRR). Sixty-two percent of households without access to a 401(k) are at risk of not being able to maintain their standard of living in retirement, but that number drops to 48% for households who do have access to a 401(k), the CRR’s National Retirement Risk Index (NRRI) found.
Not surprisingly, saving more also helps to improve retirement readiness. For instance, increasing the rate at which people contribute to their 401(k) plans by five percentage points reduces the NRRI for households with access to a plan from 48% to 42%, the CRR found.
One way to improve retirement readiness even more is to combine an increased savings rate with extra years of working before retiring, CRR research found. Combining two extra years of work with a five percentage point boost in contribution rates cuts the NRRI by more than half, to 23%. While not an option for everyone, working longer has a triple benefit: it delays the receipt of Social Security benefits by a few years, enables the individual to accumulate savings for more years, and it means having to fund fewer years of retirement.
As employers continue to shift from offering traditional pension plans to 401(k) plans, the burden of saving for retirement has fallen more squarely on working Americans. Employers can help employees improve their retirement readiness and their overall financial well-being by offering financial wellness programs. By providing education, tools, and advice focused on foundational financial issues, these programs can help employees make smart decisions around reducing debt, saving more, and closing gaps in their financial plans.
See some of the concrete successes achieved by an 8,000 employee health system in Central Pennsylvania when, as part of its financial wellness program, it made a Prudential Retirement Counselor available to its employees.
Prudential served as the exclusive sponsor of the National Retirement Risk Index.
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To learn more, read Planning for Retirement – Financial Wellness Programs Can Help PDF opens in a new window.
Download the CRR Issue Brief PDF opens in a new window.
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Feb 17, 2021
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