BANK OF AMERICA
Annual Research Examines Employee Engagement with Financial Benefits and How They Must Evolve to Help Them Achieve Their Goals
Bank of America Merrill Lynch today announced findings from its 2013 Workplace Benefits Report, a study of the increasingly significant role financial benefit plans play in helping the American workforce achieve financial wellness. Based on a nationwide survey of more than 1,000 employees from companies of all sizes, this research offers new insights into the availability, utilization and evolution of these workplace benefits – from 401(k) plans and health savings accounts (HSAs) to financial advice and education. Key findings include:
“Corporate benefit leaders, the retirement services industry and legislators must continue to work together to improve and protect the effectiveness and health of our country’s retirement system,” said Kevin Crain, head of Institutional Retirement and Benefit Services for Bank of America Merrill Lynch. “We see many employers actively working to empower employees to take greater control of their financial success, as well as enhancing their financial benefits to ensure they are results-based, easy to use and encourage healthy behaviors.”
For many employees, achieving financial wellness is increasingly tied to preparing for income needs during retirement, addressing the rising cost of health care and balancing competing financial demands throughout their lifetime. Although employers have made strides in recent years to help put employees in a better financial position, this study reveals a need for greater focus on the retirement readiness of the nation’s workforce and access to personalized advice that goes beyond retirement goals.
Two-thirds (66 percent) of employees indicate that their focus on retirement goals has increased during the last five years. However, most employees (85 percent) feel they are not saving enough, and 60 percent believe it will be very difficult to ever save enough to support their standard of living during retirement.
This lack of confidence may be one of the reasons why 78 percent see themselves working into their late 60s or 70s, up from 72 percent one year ago. Another reason may be that workers in later stages of their careers often find themselves on their own when it comes to transitioning into retirement. In fact, only 34 percent of workers feel that their employer provides sufficient advice to help employees with this transition.
When it comes to preparing for long-term financial security, the importance of workplace retirement savings plans is not lost on employees. The study found that the majority of people (71 percent) believe their workplace retirement savings plan will be their largest or second-largest source of retirement income, followed by Social Security (43 percent) and other savings and investments (38 percent).
The rising cost of healthcare remains a top concern for employees. Eight out of 10 (80 percent) indicate that they have experienced an increase in healthcare costs during the last two years – among whom more than half (56 percent) say they are saving less for retirement as a result.
Seventy-six percent of employees indicate that their company now offers an HSA option, among which 38 percent participate in this tax-advantaged savings vehicle. HSA participation increases to 50 percent among pre-retirees; however our research finds that younger workers (35 percent) are also using these vehicles to start saving early for current and future medical expenses. Nearly half of all respondents (47 percent) who participate in an HSA or flexible spending account (FSA) began doing so or increased their level of participation in these vehicles as a result of rising healthcare costs.
“As healthcare costs continue to rise and private sector and state employers continue to reduce or eliminate retiree health benefits, Americans need to become better savers and more informed consumers in this area of their lives,” said Bob Kaiser, head of Health Benefit Solutions for Bank of America Merrill Lynch. “We do see positive trends among our HSA users, with the number of our active and funded accounts more than doubling since 2011, and balances in these accounts increasing year-over-year for the last few years.”
According to consulting firm Devenir, nationwide assets in HSAs grew to an estimated $15.5 billion as of the end of 2012 and are projected to reach $26 billion by 2015.
Saving Behaviors and Perspectives
Other notable retirement saving behaviors and perspectives of our nation’s workforce revealed through our 2013 study include:
Making Advice More Accessible
When asked what financial matters they need the most help with, 59 percent of employees cited advice and guidance around saving for retirement, followed by managing debt, budgeting, and planning for healthcare costs. The majority of employees (58 percent) are seeking advice across all aspects of their financial life – including two-thirds of female employees (66 percent) and half of male employees (49 percent).
When asked about the resources and tools they would like their employer to provide to help them obtain financial advice, top choices cited by employees were access to a one-on-one relationship with a financial professional (51 percent), followed by online tools (46 percent), financial seminars relevant to their life stage and personal situation (39 percent), and relevant research or literature to help them make investment decisions (38 percent).
“Offering employees access to meaningful advice and education can have a significant impact on their financial health,” added Crain. “Helping them navigate the road to and through retirement can lead to positive long-term outcomes for both employees and employers.”
Financial Wellness Score
Employees indicate that there are several financial, psychological and emotional influences in their lives that have a negative impact on their ability to save adequately for retirement and to achieve financial wellness. These include rising healthcare costs (28 percent), not knowing how much they will need to retire (28 percent) or having a sense that they will never be able to save enough (24 percent), competing financial obligations and desires (28 percent), uncertainty about how or where to invest (26 percent) and a general fear of investing (26 percent).
“Too often financial stress and the weight of uncertainty surrounding one’s ability to accomplish their goals can cause them to remain inert and unwilling to look truths about their financial future in the eye,” Michael Liersch, Ph.D., director of behavioral finance for Merrill Lynch. “Recognizing that these challenges are in most instances not insurmountable, and admitting to one self that there are behavioral changes that can be made to address them, are simple but critical first steps. From there, even small, positive actions today can have a significant impact on improving near- and longer-term financial wellness.”
To better understand the current state of employees’ overall financial well-being we used this study to create a Financial Wellness Score, a new tool that uses factor analysis to identify the financial attributes and perspectives linked to one’s ability to meet future goals and present-day needs. Going beyond more traditional approaches – which merely assess one’s likelihood of meeting a retirement savings goal – the Financial Wellness Score offers insight into the interconnectivity between household finances, employer benefits and the behavioral aspects of one’s financial life. Ten attributes were identified and used to score individuals from zero (lowest) to 10 (highest). Through this tool we found 65 percent of employees would not be considered financially well (with a score of four or lower on the 10 point scale) – and only 11 percent have achieved financial wellness (with a score of 8 or higher).
For more information about the Financial Wellness Score, and to review the full findings from the study, “2013 Workplace Benefits Report: Employees’ Views on Achieving Financial Wellness,” please visit http://baml.com/benefitsreport.
Workplace Benefits Report Methodology
Boston Research Group completed a nationwide survey of 1,014 employees from companies of all sizes between March 6 and March 17, 2013, on behalf of Bank of America Merrill Lynch. To qualify for the online survey, employees had to be enrolled in a 401(k) plan. No quotas were set and no weighting was necessary.
Bank of America
Bank of America is one of the world's largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. We serve approximately 52 million consumer and small business relationships with approximately 5,400 retail banking offices and approximately 16,300 ATMs and award-winning online banking with 30 million active users. Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.
Visit the Bank of America newsroom for more Bank of America news.