Employee Financial Wellness
Add a Friendly Face to Your Employees’ 401(k)s
Why some of your 401(k) plan’s participants may need a little extra advice—and how to give it ...Add a Friendly Face to Your Employees’ 401(k)s Why some of your 401(k) plan’s participants may need a little extra advice—and how to give it to them. Before our arrival more than a decade ago, the finance world typically worked one way for everyday investors: you had a “guy.” In rare cases—much too rare—it was a “gal,” but that’s a story for another day. This advisor may or may not have been a fiduciary, meaning someone legally obligated to act in your best interest. But if you wanted to invest, you had to go through them. And they likely charged a hefty sum for their services, given that today’s average fees for a traditional financial advisor are still more expensive than alternatives like Betterment. Something about this dynamic didn’t sit well with us, so we flipped the relationship on its head. We put our team of experts to work behind the scenes. Traders and tax experts, behavioral scientists and “quants,” they all worked together to infuse technology with their investing insights, leading to a piece of software that served up personalized advice and automated features at scale and for a fraction of the cost of what most investment firms charged. While plenty of investors—800,000 and counting—utilize our approach to automated investing, some still prefer to add a human advisor to that experience, someone to coach them through their money moves face-to-face. And you know what? We not only think that arrangement is okay, it sums up our investing philosophy well: automate what you can, and leave the rest to humans. The implications for your company’s 401(k) plan All of the above holds true for your employees and their 401(k)s. You can give them an intuitive platform to automate their retirement savings. You can match a percentage of their contributions as an incentive. You can share a robust library of educational resources to help explain investing. Some will thrive in this scenario, some will struggle, and some may not bother to sign up at all. So what are you, the plan sponsor, to do? Well, you can add Financial Coaching to your Betterment at Work 401(k), giving your employees access to professional financial advice from our team of advisors. These experts—all fiduciaries, by the way—add a warm touch to the cold arithmetic of retirement saving. They can help your employees not only maximize their 401(k)s, but sort through the rest of their financial lives. “You know, the biggest emotion I sense from clients after a session isn’t excitement; it’s a sense of relief,” says Corbin Blackwell, one of our advisors. “They’re smart people, but investing is scary. Sometimes you just need reassurance that you’re on the right track.” Or sometimes, your employees really do have unusual life circumstances that make for complicated financial decisions. The sort of scenarios that aren’t easy to automate. Maybe they’re high earners, for example, trying to weigh the pros and cons of a Roth IRA conversion. In any case, it’s helpful to have an advisor like Corbin available to talk with. Giving your employees this premium resource can help boost your plan’s participation rate and may improve their financial wellbeing. It can also elevate your 401(k) above your competitors. Retirement saving’s role in the recruiting arms race So far we’ve focused on the benefits of Financial Coaching to your existing employees. We haven’t touched on the appeal to prospective employees, the people you’re hoping fill your talent pipeline for years to come. To some of these workers, a 401(k) is an expectation and neither a surprise nor a delight. They’ve seen plenty of cookie cutter retirement benefits in past jobs and none stood out, at least for the right reasons. While some companies consider this business as usual, another box to check in their benefits package, others see an advantage just waiting to be taken. Because let’s be real, what actually stands out: a piece of paper in your benefits packet, or real-time access to an expert like Corbin? Don’t take our word for it, listen to the recruits. We surveyed workers—and 1-in-5 said access to a live financial advisor could entice them to leave their current job. Whether you’re already a Betterment at Work customer or considering becoming one, Financial Coaching carries the potential to differentiate not only your 401(k) plan but your company. It’s a straightforward way to show you care about the financial well-being of recruits and current employees alike.
Helping Employees Set Up an Emergency Fund
Employers are looking for ways to help their employees save for unexpected financial ...Helping Employees Set Up an Emergency Fund Employers are looking for ways to help their employees save for unexpected financial emergencies. Betterment’s 401(k) platform can help. Your water heater fails. Your car breaks down on the side of the road. Your spouse loses their job because of a global pandemic. Life is filled with challenges, and some are more stressful and expensive than others. As a business owner, you’ve likely witnessed firsthand how financial emergencies can impact your employees. Not only does the stress affect employees’ personal lives, it can also affect their work performance, attendance, and focus. That’s why an emergency fund —with enough money to cover at least a few months of expenses—is such an important part of your employees’ overall financial plan. However, many people lack this critical safety net. Rainy day funds are running dry According to research by the Federal Reserve and reported on by the Employee Benefit Research Institute (EBRI), less than 25% of working families had liquid savings of more than three months of their family income. And even when asked if they have 75% of funds needed for three months, that jumps to just over one quarter. When faced with an emergency, employees without an emergency fund may turn to credit cards, take a payday loan, or even raid their retirement savings—triggering early withdrawal penalties and derailing their retirement savings progress. Having a solid emergency fund may help prevent employees from spiraling into a difficult financial predicament with wide-reaching implications. Emergency fund 101 So, what should your employees consider when setting up an emergency fund? At Betterment, we recommend: Saving at least three to four months of expenses—If employees have an emergency fund, they’ll feel more confident focusing on other important goals like retirement or home ownership. Investing emergency fund money—By investing their money—not socking it away in a low-interest savings account—employees don’t run the risk of losing buying power over time because of inflation. Making it automatic—Setting up a regular, automatic deposit can help employees stick to their savings plan because it reduces the effort required to set aside money in the first place. All of this is summarized for employees here: How to Build an Emergency Fund. Helping employees save for today—and someday Some employees may feel like they have to choose between building their emergency fund and saving in their workplace retirement plan. But it doesn’t have to be a choice. With the right 401(k) plan provider, your employees can save for retirement and build an emergency fund at the same time. For example, the Betterment platform is more than just a 401(k) in that it provides: Quick and easy emergency saving fund set-up Betterment makes it easy to establish an emergency savings fund—helping ensure employees don’t need to dip into their 401(k) when faced with unexpected financial difficulties. If your employees aren’t sure how much to save, Betterment can calculate it for them using their gross income, zip code, and research from the American Economic Association and the National Bureau of Economic Research.Betterment will also estimate how much employees need to save to build the emergency fund they want to reach their target amount in their desired time horizon. Using our goals forecaster, employees can model how much they need to save each month to reach their emergency fund goal and view different what-if scenarios that take into account monthly savings, time horizons, and target amounts. Linked accounts for big picture planning Our easy-to-use online platform links employee savings accounts, outside investments, IRAs—even spousal/partner assets—to create a real-time snapshot of their finances, making it easy for them to see the big picture. That means that in a single, holistic view, employees can track both their 401(k) plan account and their emergency fund. Personalized advice to help employees save for today (and someday) By offering personalized advice, Betterment can help your employees make strides toward their long- and short-term financial goals. Ready for a better way to help your employees prepare for the inevitable—and the unexpected? Talk to Betterment today.
How to Help Your Employees Deal with Financial Stress
Employee financial concerns can have a major impact on your business. Learn what you can do to ...How to Help Your Employees Deal with Financial Stress Employee financial concerns can have a major impact on your business. Learn what you can do to help ease employee financial stress. Financial stress has been felt by Americans since the birth of the country. The nature of that stress has obviously evolved and the COVID pandemic exacerbated many problems. Between juggling childcare responsibilities, student loans, medical expenses, across-the-board inflation – it’s no secret that employees are facing added pressure. And asking them to leave those stressors at the door when they start their workday may not be a realistic expectation. Consider this: Data from an American Psychological Association survey shows that in February 2022, 65% of Americans were stressed about money and the economy – the highest percentage recorded since 2015. Another recent survey found that 61% of Americans were living paycheck to paycheck, as of June 2022. And the biggest rise in paycheck-to-paycheck consumers were those earning between $100,000 and $150,000. One in 3 Americans said they’re either struggling or in a crisis with their personal finances, and over half said they had difficulty paying their bills, according to a report from Ramsey Solutions, The State Of Personal Finance In America 2022. Fifty-nine percent of Americans said they worry about their general finances daily, and about half have lost sleep in the last three months due to financial worries. What can you do to help ease employee financial stress? You don’t need a big, expensive financial wellness program to help your employees. To begin, think about financial wellness benefits resources you already have at your disposal: Does your health insurance plan have an Employee Assistance Program (EAP)? In addition to helping employees navigate health care issues, EAPs frequently offer advice on budgeting, debt consolidation, retirement savings planning, and more. Do you have an in-house expert? Enlist your CFO or another financially savvy manager, CFO, or HR professional, to share savings tips or lead an information session to address common financial issues. answer commonly asked financial questions. Do you offer a 401(k) plan? If so, your 401(k) provider likely offers a variety of educational tools and resources to help employees budget and save for retirement (and beyond). By leveraging these resources, and educating your employees about the benefits they are already receiving, you can begin the process of improving employee financial wellbeing. Betterment can help At Betterment, our mission is simple: to empower people to do what’s best for their money so they can live better. By using our online platform, employees can plan for their long- and short-term financial goals ranging from retirement to an emergency fund to a new house. Betterment’s unique technological solution: Takes into account employees’ ages, savings, and goals to create a personalized plan to help them save for the future they want. Enables employees to link their outside assets, making it easy for them to see a fuller picture of their personal finances. Can boost employees’ after-tax returns using tax-smart tools available at no additional management fee. Beyond saving for retirement, Betterment helps employees gain control of their finances so they can reduce their stress and focus on what matters most to them.
All Employee Financial Wellness articles
Why Adding 529s to Your Financial Benefits Can Appeal to Working ParentsWhy Adding 529s to Your Financial Benefits Can Appeal to Working Parents 529s can help your employees maximize money put aside for education Offering a better benefits package starts with a simple idea: your employees have diverse and ever-changing needs: Retirement may be their end goal, but there may be more pressing needs. Some of your staff might be striving to pay off their student loans. Others may need help saving for education. With Betterment at Work, it’s possible to help them with all three goals in one place. Let's take a closer look at 529 plans, an appealing benefit for working parents that helps them maximize money set aside for educational expenses. 529s help combat the steep cost of college The average cost of 4-year college tuition and fees has more than tripled since 1980. So it’s no wonder paying for kids’ education is a top concern among parents. 529s are special investing accounts that can help, and they’re growing in popularity. The number of 529s opened has increased by 55% since 2009. Funds in a 529 both grow and can be used tax-free for qualified expenses—things like tuition and fees, books and supplies, and even some room and board. You can even use them for up to $10,000 per year in K-12 tuition in all but a few states. Other benefits include a high balance limit—between $235,000 and $550,000 depending on the state—and low-maintenance investment options that automatically adjust risk as the beneficiary nears college age. Betterment at Work streamlines the 529 experience By offering your employees access to 529s through Betterment at Work, you add a unique benefit without adding another benefits provider. Manage your 529 offering right alongside your 401(k) and Student Loan Management benefits. You can even offer an employer match, just like a 401(k). Just as importantly, your employees get a simple way to sign up for this savings tool. 529s can be a pain to shop for on your own, with nearly every state offering a plan open to anyone. The quality of those plans—everything from investment options and fees to website interfaces—can vary widely. Betterment at Work simplifies things. Employees can compare and select plans all within the Betterment app, and with integrated plans, they can automatically fund their 529 through payroll deductions. They can also see their 529 savings right alongside their 401(k) and connected student loans. Both 529s and Student Loan Management are available through our Pro and Flagship plans. Learn more or get started today.
Your Employees Can’t Focus — and Money Worries Might be WhyYour Employees Can’t Focus — and Money Worries Might be Why Financial anxiety is impacting workers’ ability to do their jobs. Here’s how the benefits you offer can do something about it. From stock market whiplash to escalating inflation, the past year provided plenty for your workers to worry about with respect to their finances. And while you might think they can keep calm and carry on, new research by Betterment at Work is showing these worries are impacting their productivity. More than half (54%) of the 1,000 full-time U.S. employees surveyed in our latest Financial Wellness Barometer say financial anxiety makes it difficult for them to focus at work. So what’s an employer to do beyond increasing base pay? You’d be surprised how much benefits can help. In addition to offering a barometer of workers’ overall financial wellness and the unique struggles they face, our annual survey zeroes in on the benefits employees value most. Our survey found that while turnover has cooled since a year ago, it’s still well above average, showing the Great Reshuffle is far from over. More than half (54%) of workers surveyed would be enticed to change jobs for better benefits. Which benefits exactly? A 401(k) is mentioned most often among desirable financial wellness benefits, but it’s not the stopping point. Hot on its heels are two other benefits, with each one illustrated by a troubling trend. Breaking the retirement bank, in case of emergency An alarming number of surveyed workers (more than one-in-four) tapped into their retirement accounts to pay for short-term expenses. This behavior not only has big implications for their retirement goals, but can quickly become a bad habit. Instead of getting a high yield on cash set aside for short-term expenses, like the variable 4.75%* offered in a Betterment Cash Reserve account, savers who dip into their retirement accounts early are, with few exceptions, slapped with a 10% penalty by the IRS. All of this points to a notable lack of emergency funds—and explains why an employer-sponsored emergency fund is the second-most desired benefit beyond a 401(k). These funds act similar to a 401(k), with contributions automatically coming from a worker’s paycheck, albeit without the tax benefits of a retirement account. At a minimum, employers can help educate their workers on emergency funds and how to build them. Feeling the squeeze from student loans Nearly half of Millennial and Gen Z workers surveyed currently hold student loan debt — and a lot of it. Among all workers surveyed who hold this type of debt, the majority (59%) owe at least $10,000. Payments on federal student loans may still be paused through at least the first half of 2023, but the previously-announced $10,000 of debt relief on said federal loans is now in limbo. And with this much student debt saddling Americans, saving for retirement will likely continue taking a back seat to paying down student loans. This also shows why greater employer support would be welcome in this space. That support can take the form of 401(k) add-ons like our Student Loan Management.
Helping Latinx Employees With Their Unique Retirement NeedsHelping Latinx Employees With Their Unique Retirement Needs Support Latinx employees this Hispanic American Heritage Month—learn about their unique challenges when saving for retirement. National Hispanic American Heritage Month spans from September 15 through October 15 and, as a part of this month of recognition, we asked ourselves at Betterment for Business: What are the unique challenges facing Latinx-American employees today? How can we learn about these challenges and address them as a part of our ongoing effort to promote Diversity, Equity and Inclusion at Betterment? It turns out that not only do Latinx-Americans—the largest ethnic group in the U.S.—have disproportionately low retirement savings, but they also have disproportionately low access to savings. Plus gender and age also play a factor. For employers committed to building out a financial wellness program that helps all employees, understanding the intersectional issues and how Latinx employees have unique needs and challenges is key. In this article, we’ll cover three important learnings that can help inform your wellness programs, and how you can build support for Latinx employees during this National Hispanic American Heritage Month and beyond. Latinx Employee Savings Lag Behind White Employees According to a 2021 report by MorningStar, only 31% of Latino households with income report that they are participating in a retirement savings plan, compared to 51% of non-Hispanic white households. Additionally, for the median Latino households who do save for retirement, studies show less growth and less overall retirement wealth than the median white households. When Latino families are saving for retirement, they are saving significantly less money than their White counterparts. That said, younger Latinxs are eager to save. For example, 1 in 5 Latinx respondents are actively looking to buy property in the next year, a rate more than triple that of non-Hispanic White buyers, according to the Hispanic Wealth Project. You can encourage Latinx employees to continue to diversify their investments and to set aside retirement savings in addition to their other assets—especially if you offer an employer-sponsored match that can help them reach their goals even faster. Access to Employer-Sponsored Retirement Plans is Also an Issue For Latinx-Americans, access to retirement-sponsored retirement plans is “significantly” lower than it is for White workers. Overall, about 31% of Latinx workers participate in a retirement plan, compared to 51% of White workers But, to put this into further context, they are significantly less likely to have that access in the first place. Hispanic households are 17% less likely than white households to have access to a retirement plan. As such, Latinx-Americans, particularly younger populations, feel the pressure of providing a social safety net to their families and loved ones. They are 51.6% more likely to live in multi-generational households than the general population and, when surveyed, one half agreed that it was more important to help friends and family members now than to save for their own retirement. It is important to offer a full-picture financial wellness solution that helps to address the unique needs of Latinx workers, which can include planning for the retirement of their loved ones or investing in additional real estate for their growing families. Older Women are Disproportionately Affected Nearly one in five Latinx women (18.6%) over the age of 65 live in poverty. And without the income from work, this population would not be able to meet the cost of basic living expenses. Separately, Black and Latinx women make up a disproportionate share of domestic workers, with Latinx women making up over 29% of domestic workers as compared to only 17% of all other workers. Only 19% of domestic workers have access to health or retirement benefits, compared to 49% of other workers. Consider your employee population and how factors like the pandemic may have affected them and the members of their household. Offer financial planning services and remind them that it’s never too late to get started with their savings, debt repayment, or other financial goals.