According to a new survey global HR solutions company Aon Hewitt, employers are making improving the financial wellness of their workforce a bigger priority. The survey of more than 425 U.S. employers representing 11 million employees revealed that workers need 11 times their final pay to meet their financial needs during retirement, yet the average American worker has a savings shortfall of 2.2 times pay. To help bridge this gap, 80 percent of employers polled said they are making financial wellness a top priority in 2013.
Nearly two-thirds (61 percent) are looking beyond current participation and savings rates and are helping workers evaluate their retirement readiness, an increase from 50 percent in 2012. Also, 86 percent of companies said they plan to focus communications initiatives on helping workers evaluate and understand how much they need to save for retirement.
“Employers understand that financial wellness is more than what workers are doing today in terms of savings in their retirement programs—that it’s evaluating whether their long-term investment strategies are positioning them to be ready when it comes time to retire, and whether other priorities are getting in the way,” Patti Balthazor Björk, director of Retirement Research at Aon Hewitt, said. “Helping workers get an accurate picture of their future needs and whether they are on track to meet those needs, and helping them create a roadmap for achieving those goals is paramount.”
Employers continue to offer and promote the use of investment advisory tools to help workers reach their retirement goals. Seventy-six percent reported currently offering target-date funds as a way to provide workers with a simple and straightforward approach to investing, and of those not offering the tool, 35 percent will likely add this option in 2013. Managed accounts and online third-party investment advisory services were also popular at 64 percent, a 24 percent jump since last year.
The survey also shows how employers are making plan design changes to their DC plans to help workers better manage their money once they reach retirement. Currently, 28 percent of companies offer in-plan retirement income solutions—including professionally managed accounts with a drawdown feature, managed payout funds, or insurance or annuity products that are part of the fund line-up, almost double the number of employers offering these solutions in 2012.