Workers are financially drowning and retirement savings is a major red flag

A major new survey of American employers and workers reveals a workforce under severe financial strain, which many employers appear to be significantly underestimating.

The survey of 1,900 employers and more than 6,100 workers in late 2025 found a consistent pattern of employers overestimating the financial health of their workforce while workers quietly absorb the consequences of persistent inflation, inadequate benefits, and mounting retirement anxiety.

Almost eight in 10 employers expressed optimism about their company's future, but their employees see things differently: only 56% of workers felt optimistic about their own prospects — a 22-point gap that threads through virtually every financial finding in the "Employers, Workers, and the New World of Work" report from the non-profit Transamerica Institute.

"As AI promises to revolutionize business models, employers are upbeat about the future, but they may be overlooking their most valuable asset — their employees," said Catherine Collinson, CEO and president of Transamerica Institute and its Transamerica Center for Retirement Studies. "It takes people to implement and operationalize new technologies and, right now, workers are stressed and strained in today's economy."

Alarming retirement outlook

The retirement savings picture is among the most alarming findings of the report.

The median total household retirement savings among all surveyed workers in 2025 was $78,000. But that figure masks a severe stratification by employer size: workers at small companies had saved a median of just $53,000, compared to $85,000 at medium firms and $121,000 at large ones.

Although 84% of employers said they were confident their workers would achieve a financially secure retirement, only 69% of workers expressed that confidence.

Ninety-one percent of workers said a 401(k) or similar plan is important to them, yet only 61% of employers offer one. Among small companies 37% offer no retirement benefits whatsoever. Just 4% of medium companies and 1% of large companies fall into that category.

Among 401(k) plan sponsors, 96% make some form of employer contribution, and 94% offer professionally managed investment options such as target date funds or managed accounts. Eight in 10 (85%) of plan sponsors also agreed that their employees would like more guidance on reaching their retirement goals — a view echoed by 73% of workers who are offered a plan.

Automatic enrollment remains an underutilized lever. Only 27% of plan sponsors have adopted it, though large and medium companies are ahead of the curve at 34-35%. For those that have implemented it, the default contribution rate sits at a median of 8%, and 79% report that employee response has been positive. Automatic escalation — which gradually increases contribution rates over time — has been more broadly adopted, with 73% of plan sponsors having that feature in place.

The SECURE 2.0 Act continues to reshape the playing field. The report notes that beginning in 2027, the Saver's Credit will be replaced by a new Saver's Match — a federal government matching contribution for eligible savers. Currently, 65% of 401(k) sponsors both know about the Saver's Credit and actively promote it to employees, but 14% remain unaware of it entirely.

Only 44% of plan sponsors offer pre-retirees access to a financial advisor, 39% provide an array of income solutions, and just 27% offer guaranteed income as a payout option. Some 84% of employers that offer no retirement benefits do absolutely nothing to help workers transition their savings as they near the end of their careers.

Inflation impact

Some 86% of employers acknowledged that inflation is making it harder for employees to save for retirement, and 78% of workers said the same about their own situation with 75% of workers saying they had taken at least one action due to financial strain from inflation in recent years, such as cutting everyday expenses, dipping into savings, or picking up extra work. Fifteen percent tapped their retirement accounts and one in four took on a second job or side hustle.

Employer awareness of that side-hustle reality creates its own tension: more than half of employers (54%) said they have concerns when employees take on additional income sources outside of work — even as those same employers broadly acknowledge why workers are doing it.

Nearly three quarters of employers believed their workers had enough set aside to absorb a major unexpected financial shock, but in reality, one third of workers had saved less than $5,000 for emergencies, and 14% had nothing saved at all. The median emergency savings figure among all workers was just $5,000.

Financial literacy compounds the problem. Thirty-nine percent of employers believe their workers have strong personal finance knowledge, while only 21% of workers describe themselves that way. Seven in 10 employers (71%) agreed that their employees don't know as much as they should about retirement investing — a view shared by 61% of workers themselves. Yet only 26% of employers offer a financial wellness program as part of their benefits package.