Household Finances Cause Highest Stress Levels For Americans

July 29th, 2015, No Comments, be the first ».

According to a LIMRA study, 42 percent of Americans’ household finances caused “somewhat high” or “very high” stress levels, compared to other areas of their lives.  Personal health and work issues came next, with each cited as a source of high stress by 29 percent of consumers.

“In an effort to gauge the opportunities for our member companies, LIMRA is exploring the topic of financial wellness in America,” said Jennifer Douglas, associate research director, Development Research at LIMRA. “Our first study assessed the financial wellness of all consumers relative to each other, identified where financial stress takes its greatest toll, and measured consumer receptivity to financial education programs.”

Daily stress that requires consumers’ time and attention and/or consumes their thoughts affects 7 in 10 Americans in one or more common areas such as finances, health, work, relationships and day-to-day life.

One of the leading factors associated with consumer stress involves raising children. While few consumers said this is the cause of daily stress, children in the household increase the likelihood for stress in many other areas.

Work is another source of stress that correlates with stress in other areas, but, here workers readily acknowledge the source.  Half of full-time workers reported high stress from issues on the job. “Four in ten employees admit that stress is a distraction at work,” said Douglas. “Yet, these workers are more likely to cite workloads, supervisors, co-workers and job security as the stressors and less likely to acknowledge personal issues as a distraction.”

A look at consumers’ financial situations helps explain their high stress levels. According to the study, 42 percent have no rainy-day savings and only 18 percent are debt-free. While 60 percent of non-retirees are saving for retirement, only 32 percent have a long-term financial plan. (See Chart)

On the positive side, 8 out of 10 consumers have an interest in at least one area of financial education, with half looking for help with general budgeting.

“Consumers with the highest stress levels are looking for basic financial education like budgeting, reducing debt and understanding employee benefits. Effective financial wellness programs should address these fundamental topics, as well as retirement planning and other long term interests,” noted Douglas.

Among employed consumers, 38 percent would like to access one-on-one advice with a financial advisor through their employer. More than half of Gen Y workers (25-34) are in favor of this benefit.

The study, Financial Triage: Assessing Consumer Wellness, looks at the relationship between objective measures of consumers’ financial situations and their stress levels. It also gauges how well consumers understand financial issues and their interest in financial education.

By LIMRA

Debt Down, Confidence Up

July 21st, 2015, Comments Off on Debt Down, Confidence Up.

Although confidence is still a long way from the historic highs seen during the 25-year history of the Retirement Confidence Survey, 22 percent of workers now say they are very confident about having enough money to live comfortably throughout their retirement years. That’s up from 18 percent last year and a record low of 13 percent in 2013.

The 2015 Retirement Confidence Survey, released by the Employee Benefit Research Institute and co-sponsored by the Principal Financial Group, also found that respondents view debt as less of a problem than in years past. Among workers, those reporting debt as a major problem dropped from 20 percent last year to 13 percent this year, while those saying it was not a problem rose from 42 percent last year to 49 percent this year.

“Debt can be a huge distraction from savings goals, and many may view it as a reason to not save anything for retirement,” said Luke Vandermillen, vice president at The Principal. “It’s encouraging to see debt becoming less problematic for some. For those who continue to struggle, it’s possible to simultaneously pay down debt while saving for retirement by creating a plan and sticking to it.”

Reports of increased confidence are almost exclusively from those who indicate they or their spouse has a retirement plan (defined-contribution, defined benefit or individual retirement account). Nearly half of workers without a retirement plan are not at all confident about their financial security in retirement, compared with only about one in 10 who have a retirement plan.

If automatically enrolled in an employer-sponsored retirement plan at a 6 percent salary deferral rate, three-quarters of respondents would continue that 6 percent contribution or raise it. Similarly, 46 percent would continue auto-escalation of their contribution (increasing 1 percent per year) until the contribution reached 10 percent of their salary or higher.

“Workers are recognizing the value of automatic features in their employer-sponsored retirement plans in helping them reach their savings goals,” Vandermillen said. “Our analysis over the years has found that saving 10 percent of your salary, plus any employer match, over the course of a working career is the key to achieving a more secure retirement[1]. These simple, yet critical, plan features can make a huge difference.”

Many behind schedule

Despite improvements in confidence levels and issues with debt, many of the warning signs about lack of preparation have not changed. Nearly two-thirds of workers say they are behind schedule in planning and saving for retirement. And only one third spend more than eight hours a year—or about one working day—on planning for retirement.

Other key findings include:

  • 21 percent of workers estimate they will need $1 million or more to live comfortably in retirement, an increase from 15 percent back in 2005.
  • 69 percent of workers think it is possible for them to save an additional $25 a week for retirement.
    • Nearly half of workers could save an extra $25 a week by cutting back on eating out or getting takeout food.
    • 24 percent would not have to give up anything to save an extra $25 a week.
  • Half of workers have long-term disability insurance, either on their own or through their employer.
    • A third of workers believe a six-month disability would have no effect on their retirement or preparation for retirement.

Full survey results are available at www.ebri.org. For more research, analysis and insights from The Principal, visit The Principal Knowledge Center.

By Ayo Mseka
Editor-in-Chief