Want To Retire 3 Years Sooner? This Benefit Could Be Your Ticket

There’s an employee benefit that can supercharge your 401(k) and help you retire about three years sooner. It’s your financial wellness benefit, the best employee benefit you may not have heard of. It’s designed to help you build financial independence – but only if you take advantage of it.

The latest research measures the impact

Financial Finesse’s research paper, The ROI of Improving Employee Retirement Preparedness, studies a national sample of 18,148 participants in financial wellness benefits and associated retirement plan participation. This study found that even moderate improvements in overall financial health could result in the average employee under 35 retiring 2.67 years sooner. The typical early career employee who improves their financial wellness score from a 4 to a 6 (on a 10 point scale) has corresponding increases in retirement plan contribution rates. As contribution rates increase, retirement account balances increase, and the age at which an employee is projected to replace 80 percent of their income in retirement is reduced.

Across all career stages

While younger employees could see a bigger reduction in target retirement age from financial wellness programs, it’s still beneficial for employees of all ages to participate. Significant reductions in projected retirement age due to increased financial wellness occur across all career stages. The reduction for the entire workforce averages 2 years.

Financial Wellness Score (4 – 5) Financial Wellness Score (4 – 6)
Age Range Reduction (years)
<35 1.33 2.67
35-44 1.17 2.25
45-54 0.83 1.58
55-64 0.58 1.17
65+ 0.50 1.00

Source: Financial Finesse

Financial coaching to tackle what’s getting in the way of saving

Greg Ward CFP®, director of Financial Finesse’s Financial Wellness Think Tank, said that the key ingredient in improving employee financial health is one-on-one interactions with an unbiased financial coach. “Financial coaching helps people break through blocks to retirement savings by tackling debt and student loans and managing cash flow,” he explained. “This kind of financial mentorship helps people navigate important life goals like taking a new job, marriage, parenthood and home ownership.” Ward said this was good for both employees who built bigger retirement nest eggs, and employers, who realized measurable costs savings from reductions in workforce financial stress. Those employees who engaged with financial coaches over time saw big results compared to those who engaged with the program only online.

Source: Financial Finesse

Money mentorship for your life goals

No matter what your goals are, your financial wellness program can help you manage your money wisely and more confidently, so you can reach them. Most early career employees aren’t thinking about retirement. Instead, they’re thinking about the competing financial priorities of early adulthood: getting their own place, enjoying life, paying off student loans and eventually home ownership, marriage and parenthood. Mid-career employees are typically juggling work and family and the tsunami of bills that comes along with owning a home and raising children. Later career employees are concerned with getting their financial houses in tight shape before retirement by paying off debt and building up cash reserves.

How small changes supercharge your plan for financial independence

Financial coaching is money mentorship, which can help you tackle whatever is getting in the way of adequate retirement savings. If you can free up resources to save just a little bit more now, you can supercharge your 401(k) both through additional contributions and the effect of time on compounded investment returns. The end result is that you will reach financial independence sooner and can do what you want to do next, whether that’s travel in retirement, start a business or write that best-selling novel.

How do I know if I have a financial wellness benefit?

“If your employer doesn’t offer a financial wellness benefit yet, it’s coming soon,” says Financial Finesse CEO Liz Davidson, who founded the nation’s first unbiased financial wellness firm in 1999. According to research from Alight Solutions, 79% of large employers either have some type of financial wellbeing strategy or are in the process of creating one. If you’re not sure whether what your company has is a financial wellness benefit, see this infographic. If you know you have a financial wellness benefit but aren’t sure how to best take advantage of it, see The 6 Best Ways To Use Your Financial Wellness Program At Work. You could be on the beach with a tiny umbrella in your drink three years sooner.

 

 

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