Bank of America Merrill Lynch Study Finds American Workforce Concerned About Overall Financial Health

Employers in Key Position to Empower and Encourage Employees to Better Manage Their Finances Today and Prepare for the Future

NEW YORK--(BUSINESS WIRE)-- A study released today shows that compared to 2013, American workers’ stress about their finances has increased, while confidence in their financial futures has decreased. The latest Bank of America Merrill Lynch Workplace Benefits Report points to employers’ continued adoption of programs that promote financial wellness as a potential key to turning these negative trends around. Eighty-three percent of employees today cite workplace financial benefits as critical to their financial security.

Based on a nationwide survey of more than 1,200 employees with 401(k) plans at companies of all sizes, the report highlights employees’ financial struggles and how employers’ support can help them build greater financial confidence. Key insights include:

• Three in five employees feel stressed about their financial futures, up from 50 percent in 2013.
• More than half (55 percent) admit to needing help managing their finances, including saving for retirement and managing debt.
• Nearly seven in 10 (69 percent) have experienced a rise in health care costs over the past two years, directly attributing to decreased retirement savings.
• Fifty-nine percent want help understanding how workplace financial benefits can aid in increasing their financial security.

“Given how many are struggling with today’s financial demands while planning for their future, employers are in a critical position to help their employees secure their financial future,” said Lorna Sabbia, head of Retirement and Personal Wealth Solutions for Bank of America Merrill Lynch. “By working in close partnership with a plan provider dedicated to helping employees live better, such as Bank of America Merrill Lynch, employers can provide their employees financial wellness programs and benefits that are accessible and integrated.”

Retirement savings assumptions look too rosyNearly two-thirds (64 percent) of employees say they have increased their focus on retirement planning and saving and recognize the importance of the savings plans offered by their employers. In fact, the majority (68 percent) say that these financial benefit plans will be their largest or second-largest source of income in retirement.

Despite these good intentions, and the fact that 70 percent claim to have at least a pretty good idea of how much they’ll need to maintain their desired lifestyle in retirement, many appear to have unrealistic savings assumptions:

• Forty percent say they’ll need less than $500,000.
• Sixty-one percent say they’ll need less than $1 million.

For context, a healthy couple retiring today at age 65 with a $1 million nest egg could receive an estimated $40,000 in annual income at a draw-down rate of 4 percent1, and on average will spend $400,000 in health care costs2 over the course of their retirement years.

Health care costs, tradeoffs and solutionsDisrupting plans to increase retirement savings, health care costs continue to rise with 69 percent of employees reporting an increase over the past two years. Among those who have experienced an increase, 77 percent indicate that they are saving less for retirement as a result, and 23 percent report saving “significantly less.”

In response to higher medical costs, 46 percent of employees have started contributing or increased their contributions to health savings accounts (HSAs) and flexible spending accounts (FSAs). In alignment with more employers offering plans, the percentage of employees participating in an HSA grew by nearly 50 percent since 2013.

However, understanding of these vehicles appears to be limited. Fifty-three percent of employees with an HSA view it as a short-term vehicle to cover near-term health care expenses, as opposed to a long-term savings vehicle. Additionally, 55 percent usually spend their entire HSA balance within a given year.

Role of an employer in improving financial wellnessEmployees are overwhelmingly looking to their employers to help manage their financial lives. While the vast majority believes the benefits offered by their employer are critical to their financial security, 59 percent say they need further help understanding how those benefits can work for them.

As a study of employers conducted in 2015 uncovered, financial wellness programs – offering resources and education to foster employees’ financial well-being – are evolving from “nice-to-have” into a “must-have.” As of last year, 48 percent of large companies had a financial wellness program in place, with another 19 percent planning to add one within the next two years.3 However in this year’s survey of employees, only 36 percent of them say their employers offer a financial wellness program, underscoring communication and awareness disconnects.

“As one area of life can naturally spill over into another, it’s wise of employers to offer guidance and solutions that address their employees’ complete financial picture,” said Kim Kasin, financial guidance executive at Bank of America Merrill Lynch. “However, in a diverse workplace, it’s important to communicate in a way that addresses experience and knowledge at all levels and provides individuals education that spans the basics to the more complex.”

In terms of access, the survey found employees want a combination of personal assistance and digital. In fact, a near-identical percentage of employees say they want online tools (54 percent) as those who want access to a one-on-one relationship with a financial professional (52 percent). While employees are looking to their employers for help, one potential barrier to overcome is employees’ comfort level seeking financial help from their employer. Millennials have far less desire than other generations to separate their personal finances from their work life; only 37 percent, compared to 58 percent of baby boomers. Employers have the opportunity to create a culture that makes it acceptable to ask for help bringing personal finances and work benefits together to create a well-balanced financial life.

“By offering financial wellness solutions and addressing their employees’ needs, employers can create a culture that enables the employees to accept the assistance,” adds Kasin.

For more findings from the Bank of America Merrill Lynch Workplace Benefits Report and actionable advice for plan sponsors, click here.

1 Bank of America Merrill Lynch, $1 million nest egg will produce $40,000 in annual retirement income. The accumulated investment nest egg by age 65 could provide an annual retirement income adjusted for future inflation (in today’s dollars) for this amount for life if withdrawn at a sustained spending rate of 4 percent.

2 HealthView Services 2015 Retirement Health Care Costs Data Report, includes Medicare B, D, and Supplemental insurance and expected dental, vision, hearing, co-pays and all other out-of-pocket cost for healthy couple retiring today.

3 2015 Bank of America Merrill Lynch Workplace Benefits Report.

Workplace Benefits Report MethodologyBoston Research Technologies conducted an online survey with a national sample of 1,227 employees between October 27 and November 11, 2015 on behalf of Bank of America Merrill Lynch. To qualify for the online survey, employees had to be current participants in a 401(k) plan. The plan did not have to be provided by Bank of America Merrill Lynch.

Bank of AmericaBank of America is one of the world's leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 47 million consumer and small business relationships with approximately 4,700 retail financial centers, approximately 16,000 ATMs, and award-winning online banking with approximately 32 million active users and approximately 19 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.

Bank of America Merrill Lynch is a marketing name for the Retirement Services business of Bank of America Corporation (BofA Corp). Banking activities may be performed by wholly owned banking affiliates of BofA Corp, including Bank of America, N.A. (BANA), member FDIC. Certain associates are registered representatives with Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) – a registered broker-dealer, member SIPC, and wholly owned subsidiary of BofA Corp – and may assist you with investment products and services outside of Heath Benefit Solutions. MLPF&S does not provide any services for the Bank of America HSA.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160413005198/en/

Reporters May Contact:
Julia Ehrenfeld, Bank of America, 1.646.855.3267
[email protected]

Source: Bank of America

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