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Society Human Resources Retirement Workforce

Helping Employees Reach Financial Security

Global Leader for Individual Wealth for Mercer

Time spent focusing on personal finances is a common aspect of life. Since much of the time spent worrying about money takes place at work, this results in lost productivity for both the individual and employer. According to the most recent Inside Employees’ Minds research from Mercer, 4.5 percent of payroll dollars are wasted on employees spending time on the job worried about money.

In addition to cost, organizations that ignore this anxiety risk an increasingly disengaged workforce. More and more, workers not only worry about their current expenses, but are also having to accept greater responsibility for managing their own long-term savings—with the goal of an adequate retirement income—which adds to their stress. Clearly, employers have a stake in inspiring greater employee confidence on the road to financial security.

To help drive the conversation on financial security this week at the World Economic Forum in Davos-Klosters, Switzerland, Mercer introduced its latest research: Healthy, Wealthy and Work-Wise: The New Imperatives for Financial Security. The project investigated employer and employee beliefs, perceptions and behaviors related to financial security across wealth, health and careers, surveying 7,000 individuals and 600 senior decision-makers from both the private sector and government in 12 developed and developing countries.

Better benefits, more accessible savings plans and guidance and technology tailored to individual needs would have a very positive impact on a workforce, the research shows. Improved benefits or access to savings plans would make 86 percent of employees more satisfied and more committed to their jobs. This means a significant boost in employee engagement.

Employees place an extremely high degree of trust in their employer’s advice, the research reveals, with nearly 80 percent reporting they trust their employer for sound financial advice. Customized communication and solutions are also critical, particularly since our financial needs vary significantly across age, gender, or stage in a career.

Different Groups, Different Needs

Millennials, who comprise the largest segment of the global workforce, switch jobs more often than any other age group. Employers should explore solutions that address their specific needs, such as portable savings plans, financial coaching, student loan repayment plans, and budgeting tools. This would help their millennial employees to be more engaged and more likely to stay in their organization.

Women also face a gap in wages and career continuity, as they earn less on average and have longer periods out of the workforce. As a result, their retirement balances are typically 30-40 percent lower than those of men. Compounding the problem, women live longer than men on average and so require their savings to last longer. To ensure their female workforce is empowered, engaged and financially secure, organizations must examine the communications and investment solutions that they offer to women.

Older workers have unique needs, primarily around increased longevity and working later in life. Men’s average retirement age across OECD member states has continued to increase over the last 15 years and is now at 65.8, compared to 64.3 two years ago, according to the OECD.

Employers who prioritize their employees’ financial security needs and goals will make themselves the trusted adviser that every employee is looking for.

This aging workforce will disrupt the status quo of what it has traditionally meant to retire in one’s mid-60s. It will require more flexible and innovative work solutions, including offering part-time work options for those nearing retirement; lifetime education programs; health initiatives so that employees are able to work as long as they need; and guidance on their options for when to take social security benefits.

One obvious implication of living longer is that we are going to have to spend more years working. The notion of working for 35 or 40 years and then abruptly ceasing work in one’s mid-60s and living in a state of non-income generating “retirement” will become a thing of the past. Instead, we will need far more fluid notions of work, and the clear divide between our working and retirement years is going to have to change.

The Transformation of Retirement

A few highlights from the research in Healthy, Wealthy and Work-Wise show why it’s imperative to replace our outmoded concept of retirement with a far more flexible view of working during our later years. People expect to spend 15-20 years in retirement, but only 26 percent are confident they can save enough for retirement, while 68 percent of people globally either don’t ever expect to retire or expect to keep working after retirement.

To countenance this global retirement transformation effectively, governments will need to consider raising or even eliminating set retirement ages. As later-life financial needs vary, flexibility is key as people will need and want to choose how long to work. At the same time, individuals will need to continue to develop professionally while also maintaining the physical well-being to work into their later years.

Organizations will need to consider how best to keep their older employees contributing longer, which will not only benefit those workers but will keep valuable experience and competencies in-house in the face of a shrinking talent pool. They will have to help workers keep their skills relevant so they can be employed for as long as they need to be. Providing the right training programs is another imperative, along with an assessment of how flexible their retirement plans are and how well they support individuals who move in and out of the workforce or work part time. 

Stress, access to the right tools and solutions, affordability and confidence all affect an individual’s ability to save and invest. A person’s age, gender, and career stage make a difference, too. Employers who prioritize their employees’ financial security needs and goals will make themselves the trusted adviser that every employee is looking for.

Organizations have a unique opportunity to transform their employees’ financial security, to help take the worry out of personal finances and, in doing so, ensure a more engaged workforce. Moreover, when organizations show that they are prioritizing their employees’ long-term well-being, they will find it easier to achieve their biggest challenge: attracting and retaining top talent.

Renée McGowan

Global Leader for Individual Wealth for Mercer

Based in New York, Renée McGowan is Mercer’s Global Leader for Individual Wealth and is responsible for the global strategy and growth of this retirement savings segment.