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Employee 401(k) accounts may have taken a hit during recent market volatility, but that’s not the only reason balances may be lower.
A new study by Morgan Stanley at Work finds that 62% of workers have reduced their short and long-term savings amid high inflation and fears of a possible recession.
Nearly a third — 31% — of respondents reduced contributions to their 401(k) plans. Meanwhile, 26% said they reduced their debt repayments, 25% reduced their long-term savings, 24% reduced emergency and short-term savings, 19% reduced contributions to health savings accounts, and 13% reduced contributions to a college savings fund.
Additionally, 71% of employees said money-related stress has negatively impacted their work and personal lives, a 7% increase from 2021. At the same time, 84% of HR leaders said they are concerned that personal financial issues are affecting employees. Productivity.
The online survey was conducted between July 13 and 19 and included 1,000 working adults and 600 HR managers.
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The lower savings are worrying because, according to Brian McDonald, head of Morgan Stanley at Work, “more wealth is created in the workplace than anywhere else”.
These include 401(k) and deferred compensation plans, employee stock plans, emergency savings accounts and student loan assistance.
“Employees still see the 401(k) plan as the number one thing on their mind when they think about benefits in the workplace,” McDonald said. “That certainly hasn’t changed.”
The fact that employees have reduced their 401(k) contributions year after year is concerning, McDonald said, as they are failing to take full advantage of their company pension plans and the compound interest that can help them build wealth over time .
Start by getting the most out of your 401(k) plan—not the maximum that’s allowed, but the maximum that you can do.
brian mcdonald
Head of Morgan Stanley at Work
Admittedly, setting money aside for long-term goals can be difficult as expenses like rent and school fees rise, McDonald said.
“Start by getting the most out of your 401(k) plan you can do — not the maximum you’re allowed to do, but the maximum you can do,” McDonald said.
Financial wellness benefits are gaining momentum
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According to McDonald, company executives are doing more to provide holistic financial benefits to employees and are spending more on those benefits.
“The conversation is more about financial well-being, and that trend is certainly gaining momentum,” McDonald said.
The survey found that 60% of employees are paying more attention to reviewing their financial benefits than they did a year ago.
Additionally, 84% of HR leaders say employees have requested financial benefits that their companies do not provide, up from 78% in 2021.
And that’s despite the fact that the survey found that more executives are now saying their companies are delivering quality financial benefits.
Still, 96% of HR leaders said their organizations need to do more to help employees better understand how to maximize the financial benefits available to them, versus 93% who said the same thing last year.
Now 89% of employees agree, up from 87% in 2021.
When it comes to financial benefits, employees cited access to a financial advisor as their top choice at 52%; followed by goal-based retirement planning at 48%; and access to pension tools and calculators, 46%.
However, HR managers cited other priorities, with goal-based retirement planning coming first at 47%; followed by access to tools and calculators for retirement planning at 43%; retirement savings workshops, 40%; and access to a financial advisor, 40%.
