PLANADVISER - Spring 2023 - 29

been great calculators at the best
recordkeepers, but the numbers show
that less than 8% of employees utilize
those tools. We have a very complicated
industry, and many of the terms we use
don't mean much to people. What's an
annuity? What's a managed account?
We've found that financial wellness is another 'buzzword.'
At the core, they're extremely valuable, but it's the human
interaction that helps draw an employee to those tools. For
instance, financial wellness can be available on a website,
but if nobody goes there, it doesn't help.
You really want to ask each employee how they want to
" How can plan sponsors
help employees boost their
emergency savings, and offer
other voluntary-benefit types of
insurance protections ...? "
CATHERINE COLLINSON
get their information. It might be a one-on-one session, with
us, as advisers, reaching out to the individual, or getting on
a Teams or Zoom call and walking them through the tools
available on their retirement website.
It might also be a financial wellness platform, like Hub's
FinnPath. That's a great way to talk about individual life
actions, whether it's debt reduction, life insurance or even
the retirement plan. But we need to be able to connect with
an employee, [whether] in person-believe it or not, those
meetings are coming back-or over a Zoom technology ...
or in written form.
We need to have all those choices for employees and
then take them through that " one thing they can do today. "
If that one thing is reducing their credit card debt, let's focus
on that. That will get them financially strong.
If they've already gotten to that point and need to
increase their contributions, great. That's the one thing. But
we need to 'baby-step' them. And it has to be more than just
using all the wonderful bells and whistles out there, and be
truly customized to what that individual needs.
PA: Absolutely. Catherine and Bridget, from the research
side, what do you see in this movement toward financial
wellness?
Bearden: Employee Benefit Research Institute has been
around since 1978, and our core research focuses on retirement
and wealth benefits offered through the employer,
as well as health benefits. We see that health-care costs
and financial well-being are intrinsically linked from both
the employee and employer perspectives. When we ask
employers what top issues their employees face that their
financial wellness initiatives are designed to address, the
highest-ranked is retirement preparedness, at 35%. This
is among employers that have at least 500 employees and
are interested in or currently offering financial well-being
programs. The second, at 31%, is health-care costs.
We focus on the interrelationship between [all of
in our study " Retirement Security Projecthese
issues]
tion Model. " It simulates the percentage of U.S. population
at risk of falling short of the retirement income needed to
cover average expenses and uninsured health-care costs
[including long-term-care costs] in retirement. If you look
at some of the projected savings needed to cover health
expenses, they range widely, based on the cost of prescriptions.
For couples, it could go well over $300,000 to have a
90% chance to cover medical expenditures. This is a holistic
conversation. But I totally agree with Kim. The delivery and
messaging conveyed to employees is very important too.
Collinson: Emergency savings is also important here. How
can plan sponsors help their employees boost their emergency
savings, and offer other voluntary-benefit types of
insurance protections, which could help mitigate the impact
of a shock? Of course, in life, we know those will happen; we
just don't know when and what the cost. What worries me is
the absence of emergency savings; our research is finding a
high percentage of plan participants who are taking a loan
and/or hardship withdrawal or early withdrawal from their
retirement account. Around 30% have done one or the other.
And even though saving for retirement is good, it could be
counterproductive if they withdraw those funds and pay
income taxes on them to cover the cost of an emergency.
We ask why they're taking the money. Of course, with
hardship withdrawals, we know there are statutory reasons,
ranging from medical expenses to avoiding eviction from
their primary residence. And with loans, it's things like
paying off debt, credit card debt, some other financial situation
that arose and it was their only alternative. So as we
help participants enhance their financial wellness, having
savings available to cover short-term emergencies is also
vital to their ability to build long-term retirement savings.
PA: Any final remarks or things you'd like to add about
participants and retirement savings?
Collinson: Our industry continues to evolve. There is
tremendous innovation; there's technology; there's wisdom
regarding how investments work, behavioral finance and
behavioral economics.
There will always be new opportunities for the industry
to offer guidance, for plan advisers to give their clients
advice. It's a journey as much as a destination, and it's really
exciting. Now the opportunities are even greater, because
of what we've learned through the pandemic, and we have
people's attention.
Participants | Spring 2023 | planadviser.com 29
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PLANADVISER - Spring 2023

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