Prudential Financial : Companies play increasingly critical role in employee financial wellness

Public services are feeling the strain as people live longer in retirement.

By John Chartier

September 20, 2019

By the year 2050, the number of people supporting each senior citizen worldwide is likely to be just one-third what it was in 1950 and half of what it is today.^[1]

That's important because it's a measure of societal readiness for retirement.

'We have never faced a society where so few would support so many,' says Yanela Frias, head of Investment and Pension Solutions at Prudential Retirement. Frias was speaking at the Longevity 15 conference in Washington, D.C., last week.

It's approaching crisis proportions.

As people are living longer, spending nearly as many years in retirement as they do working, they're not saving enough to live financially secure lives. And it's expected to strain public resources. The U.S. Social Security system will only be able to pay 80% for every $1 of benefits in 2035.^[2] Governments will struggle to maintain services for seniors, says Frias.

Complicating matters is a growing global retirement savings gap. The World Economic Forum estimates that gap at $70 trillion today, and it's expected to grow to $400 trillion by 2050.

'People are just not saving enough,' says Phil Waldeck, president of Prudential Retirement. 'Not only aren't they saving enough, but the act of drawing down accounts in retirement is actually a complicated process. Making sure you don't draw too much each month or even too little requires a degree of financial expertise, and most people lack the interest and skills to manage this well on their own.'

'The stakes for employers and their employees are getting higher because the financial challenges Americans face are increasing in scale and complexity,' adds Frias.

Companies recognize the problems and are taking steps and seeing results.

At Chubb, a global insurer with more than 18,000 employees, employee financial stress was negatively impacting productivity, according to Carolyn Kennedy, vice president, Employee Benefits.

In 2018, Chubb partnered with Prudential and launched a digital financial wellness center for employees, offering surveys, self-assessments and other tools. Employees responded. During the first year, the financial wellness center saw 4,178 visitors, who logged 14,093 page views and completed 1,110 self-assessments.

The assessments revealed what Kennedy already suspected: 77% of Chubb employees were either somewhat stressed or very stressed over monthly bills, saving for the future and credit card debt. About 14% had less than one month of income should they be out of work, and 29% were not very confident their savings would be enough to retire.

The company launched the Prudential Pathways program, a series of financial wellness seminars that cover topics ranging from strategies for college funding to budgeting and debt management to retirement planning. Nearly 2,400 employees participated in the program.

Follow-up survey results asking employees, 'What will you do now?,' were encouraging, Kennedy said. Nearly half said they planned to create or update an estate plan, 37% planned to create or stick to a budget, and 27% said they would consolidate or pay off debt.

'Financial wellness is about helping people adopt behaviors that enable them to manage their day-to-day finances, achieve long-term financial goals and protect themselves from key financial risks,' says Frias. said.

She notes that the workplace has been and remains the traditional place where many individuals' financial lives come together. As Chubb is proving, offering employees access to a set of benefits ranging from income planning and daily budgeting to emergency savings features and auto-enrollment in workplace retirement plans could all help improve people's financial habits and behaviors and lead them to financial wellness.

Prudential's own employees are additional proof that offering workplace financial wellness benefits makes a difference. In 2008, 31% of the company's employees reported feeling financial stress or anxiety. After introducing several financial wellness benefits, the number of employees who reported experiencing financial problems dipped by half to 16%.

'While we can't say we have the magic formula to bridge the retirement gap,' says Frias. 'We do know there is a strong correlation between wellness, health and longevity.'

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[1] Source: United Nations Department of Economic and Social Affairs. Population Division (2019). World Population Prospects 2019. Online Edition.

[2] Source: The 2019 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. Online Edition

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