Workers Are Turning to Employers for Inflation Help

With inflation at its highest levels in more than four decades, it’s no surprise nearly three in four American workers report they’re experiencing increased stress concerning their personal finances. According to a 2022 survey of more than 1,000 employees conducted by Voya, almost 90% of respondents say inflation — including the rising cost of food, gas, and housing — was their greatest concern.

As a result, many employees (70%), are looking to optimize employer-provided benefits, including HSAs, health care, retirement savings, disability income, critical illness, and accident insurance during open enrollment. Increasingly, American families are having to reconcile competing budget priorities as they attempt to deal with day-to-day financial challenges while simultaneously working to meet longer-term retirement and emergency savings goals.

Inflationary pressures have hit lower-income workers harder, with the majority of their paychecks often allocated to purchasing food and other basic household necessities. Additionally, with pandemic stimulus and child tax credit cushions gone, the financial impacts are being felt to an even greater degree. Unfortunately, even the benefit of higher wage growth during a tight labor market has largely been outpaced by the combined effects of rent increases and inflation.

In contrast, higher-income households, with a greater proportion of disposable income, tend to apportion a higher percentage of their budgets toward retirement accounts, investment accounts, and mortgage payments versus everyday expenses. Plus, their more substantial savings and increased home equity, bolstered by the recent run-up on home prices, has helped insulate them from rising costs at the grocery store and elsewhere.

According to a 2021 Schwab survey, participants are seeking assistance from employers in the following areas when it comes to retirement planning:

• Determining how much they need to retire (44%).

• Deciding how to invest in their employer-sponsored retirement plan (39%).

• Understanding how to generate retirement income (35%).

• Anticipating retirement tax liabilities (35%).

High market volatility and retirement plan investment losses have further complicated retirement savings as participants have watched account balances diminish. Plan sponsors can provide education around mitigating investment risk as well as saving, budgeting, debt, and retirement planning through their financial wellness programming. They might also consider offering lifetime income options in their investment lineup.

Supporting workers through this unprecedented post-pandemic period of historic inflation will require a multipronged strategy, bearing in mind the outsized impacts on lower-income earners. Participants are turning to employers for guidance in maximizing their benefits and navigating financial difficulties is an encouraging sign — a sign plan sponsors should not take lightly.

Contact a KerberRose Trusted Retirement Plan Advisor for advice on how to assist your participants during this complicated market.

Sources:

Siegel, R., & Van Dam, A. (2022, February 13). ‘Survival mode’: Inflation falls hardest on low-income Americans.

Voya (2022, September 8). Inflation has majority of working Americans planning to spend more time reviewing their benefit selections, according to new Voya survey.

Peterson, M., & Fishstein, T. (2021, June 23). Schwab 401(k) Survey Shows Sharp Increase in Confidence and Demand for Financial Advice. The Charles Schwab Corporation.

Malito, A. (2022, July 26). Inflation is keeping some workers from saving for retirement.