Financial Finesse Releases Annual Study on Trends in Employee Financial Wellness for 2012

Employees’ financial wellness declined, with lower income employees, women, and Gen Xers getting hit the hardest. Still, financial stress improved and employees continued to focus on long-term planning.

El Segundo, Calif.—Financial Finesse, the leading provider of unbiased workplace financial wellness programs has released its Year in Review research on trends in employee financial issues for 2012. The research found employees’ financial wellness suffered a mild backslide in 2012. The backslide was most notable in areas of cash management. In 2012:

• Employees who reported having a handle on their cash flow fell four percentage points: Sixty-eight percent of employees reported having a handle on their cash flow in 2012 versus 72 percent in 2011.
• Fewer employees reported having an emergency fund, dropping to 51 percent from 56 percent in 2011.
• Only fifty-six percent of employees reported regularly paying off their credit card balances in full each month, a drop from 62 percent in 2011.
• Twenty-three percent of employees reported having late fees in 2012 versus 19 percent in 2011.

In a likely attempt to stop from further backsliding, employees turned to their retirement savings during 2012 to pay more demanding, short-term expenses. In 2012, 32 percent of employees reported having taken a loan or hardship withdrawal from their 401(k) plan versus 25 percent in 2011.

Liz Davidson, CEO and founder of Financial Finesse, says the reason employees turned to their retirement accounts instead of other sources of funding in 2012 is twofold. Davidson notes that “more emphasis is being placed on retirement planning in general, as employers and the overall media have been communicating and stressing the importance of retirement planning, and providing more transparent retirement plan information as a result of Department of Labor legislation last summer around fee disclosures.” Davidson sees more concern from employers and the government around the future of retirement planning for younger generations as a reason behind increases in account balances and annual contributions. Davidson adds, “Because retirement has become a key issue, more employees are participating in their retirement plans, and more are tapping these same accounts when they encounter short-term financial problems.”

“Ninety-one percent of employees in 2012 said they contribute to their 401(k) plan at work,” Davidson tells us. “That’s an incredibly encouraging number of employees participating. At the same time however, only 51 percent of employees say they have an emergency fund in place to cover unexpected expenses. That leaves 49 percent of the employee population vulnerable to tapping their retirement savings because they can’t afford expenses outside of the norm.”
Another reason Davidson says employees are tapping their retirement savings is they are less inclined to use credit cards and have less home equity available than they did prior to the recession. “Inflation is outpacing income growth, and the job market remains weak, so there are still people out there struggling,” she says. “As a result, some see their retirement plans as the only practical resource available to them.”

This is largely the reason Davidson says the backslide has hit lower income earning employees the hardest. “This group naturally has less to work with,” she says. “When someone making $100,000 a year takes a hit because inflation grows faster than their paycheck, it might impact the type of car they can drive or how often they can eat out. But when someone earning $40,000 a year takes a hit, they feel it much more because it could impact their living situation or other serious life decisions.”
Still, despite employees facing more issues managing daily finances, they appear to be unfazed. The number of employees who faced high or overwhelming stress remained low at 18 percent in 2012 (down from 19 percent in 2011) and still significantly lower than 2010 and 2009, at 32 percent and 33 percent respectively. Financial Finesse’s Think Tank Director Greg Ward notes that it is good to see employees experiencing less stress, but cautions that the team does expect stress to increase going forward due to the fact that more employees are struggling financially-- something that more employers are starting to address with workplace financial wellness programs designed to help employees build positive financial habits and behaviors.

Dperry@financialfinesse.com
(424) 218-7954

Financial Finesse is an unbiased financial education company providing personalized and
innovative financial education and counseling programs to over 500,000 employees at over 400
organizations. Financial Finesse partners with organizations to reach goals such as reducing
fiduciary liability, increasing plan participation, decreasing stress, and increasing productivity
through its unique approach to financial education. Financial Finesse does not sell products nor
manage assets. For more information, visit www.financialfinesse.com.

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