Employee Financial Wellness and the Company Bottom Line

Companies benefit by improving employee retirement preparedness

by Greg Ward and Cynthia Meyer

New research quantifies the improvements in employee retirement preparedness which generate ROI for an employer by reducing the costs of delayed retirements. The “Special Report: The ROI of Improving Employee Retirement Preparedness,” from Financial Finesse’s Financial Wellness Think Tank, found that, for a 50,000-employee company, this could lead to a savings of $65 million or more per year.

Liz Davidson, Financial Finesse CEO, notes that improvements in employee financial wellness are incremental, and increase with the number of interactions, so companies should focus on creating multiple channels to reach employees and engagement techniques that encourage them to keep coming back.

The financial wellness program repertoire for increasing retirement preparedness and decreasing delayed retirements includes easy-to-use retirement calculator, auto-enrollment, auto-escalation and one-on-one financial coaching. Financial wellness programs that include financial coaching help employees break through blocks to retirement savings by tackling debt and student loans, managing cash flow and navigating important life goals like marriage, parenthood and home ownership. Results are cumulative and interact with each other, so the longer a company has a holistic financial wellness benefit in place, the more workforce financial wellness shifts.

Davidson’s guidance for large companies considering implementing a workplace financial wellness benefit is to start with a workforce financial wellness assessment to customize the program for specific workforce demographics and vulnerabilities.   

Major Findings from the ROI Predictive Model

Repeated engagement with financial wellness programs that improves average workforce financial health from a 4.0 to a 6.0 (on a 10-point scale) increases employee retirement plan contribution rates by a factor of 38 percent from original rates.

The projected average workforce age at which an employee could retire and replace 80 percent of their income drops two years, from 68.95 years to 66.96 years.

When applied across a total workforce of 50,000 employees, that reduction in average retirement age could generate powerful employer savings of more than $65 million.

Reductions in retirement age occur across all career stages, with employees under 35 seeing the largest reduction (2.67 years) and older employees still seeing a reduction of one year. This suggests that comprehensive financial wellness programs that repeatedly engage employees can be effective in mitigating current costs of delayed retirement as well as future costs.

Even modest improvements in employee financial wellness generate meaningful savings. An improvement of the average workforce financial wellness for 4.0 to 5.0 (on a 10-point scale) leads to a 17.85-percent increase in retirement plan contribution rates, reducing the average projected retirement age by one year. This could generate more than $33 million in savings from reducing delayed retirements.

Think Tank Director Greg Ward and Cynthia Meyer are the primary authors of Financial Finesse’s “Special Report: The ROI of Improving Employee Retirement Preparedness.” 

Liz Davidson, CEO, who founded the nation’s first unbiased financial wellness firm in 1999, says quantifying the cost savings from improved retirement preparedness enhances the firm’s original predictive ROI model, which was recognized by Society of Actuaries in 2017 with a first-place award. 

Davidson recently created the nation’s first online CE course on creating an effective financial wellness program on FiduciaryEducation.com.

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