An unhealthy split is emerging between the young and old when it comes to retirement saving, even as financial wellness programs for all generations are on the rise.
According to Morgan Stanley at Work’s State of the Workplace Financial Benefits Study, concerns about inflation and a recession are causing employees, especially younger ones, to scale back retirement contributions.
The third annual survey showed 66% of employees, have reduced payments to retirement accounts, up from 62% last year, and those reductions involved contributions to to 401(k) plans (33%), long-term savings (28%), and emergency and short-term savings (28%).
Notably, greater portions of the two youngest generations — Gen Z (78%) and millennials (80%) — say they had to scale back on contributions compared to their Gen X (58%) and boomer (40%) counterparts.
All this stress, meanwhile, is turning into a major concern for both employers and employees alike. The study showed more than 83% of human resources executives worry that employees’ financial issues could affect their productivity, while 66% of employees agree that financial stress is negatively affecting their work and personal life.
On the bright side, though, the report said nearly 9 in 10 HR leaders (89%) now say they offer financial wellness programs, a 10-percentage-point gain over 2021.
“This past year we’ve seen an economic climate that frankly a lot of workplace participants, especially younger generations, have likely never experienced before,” Krystal Barker Buissereth, head of the executive services at Morgan Stanley at Work, said in a statement.
She added that financial wellness programs are becoming even more sought after as a result of this uncertainty and that HR leaders can “play a vital role by connecting employees with resources to help them navigate each step of their financial journeys.”
Surya Kolluri, head of the TIAA Institute, points out that this hasn’t been the easiest time for people to start their careers. Many of them were forced to rely on their parents during the pandemic and now are fearing a recession. Nevertheless, she says even when the economy is doing well, too many young adults think retirement is so far in the distance, they don’t have to worry.
“No matter how old people are, they need the financial literacy and longevity literacy to know that the sooner they start saving, the more their money will compound. They also need access to financial advice through their places of work. Just like employers provide medical benefits, financial wellness benefits should also be a given,” Kolluri said.
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