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CCH® HR MANAGEMENT — 09/04/07

Workers face more stress as out-of-pocket benefits costs rise, retirement savings rates fall, survey shows

Recording increased stress in every category measured, a study has found that the highest stress factors continue to be saving for retirement and paying for healthcare in retirement. Sources of financial stress have increased considerably for U.S. workers since 2005, according to survey results released August 20 by the Ameriprise Financial. The 2007 Ameriprise Workplace Financial Planning Benefit Decisions study, recorded mounting stress and worrying trends in employee benefit decisions leading into fall's open enrollment season.

"The findings indicate that while most people recognize their future retirement needs, they are unable to find and apply strategies to meet those challenges to alleviate their financial stress level and increase their confidence," said Rusty Field, vice president of AmeripriseSM Workplace Financial Planning. "This can lead some to cut back on their retirement saving, impacting their future retirement security."

Workers continue to make perilous trade-offs with their benefit dollars. Decreasing overall saving and investing continues to be the second most popular response mechanism for increased out-of-pocket benefit expenses (46 percent), consistent with prior findings and higher than all other options in 2007 except reducing discretionary spending (61 percent). "Near-term healthcare coverage continues to be a non-negotiable benefit for many when pitted against long-term saving for retirement," said Field.

The study found benefit cost increases tied to healthcare are having both a short-term and long-term impact on workers' perceptions of their financial health. More than 40 percent report an impact on their financial health and stress levels related to increases in their healthcare insurance costs. And 44 percent feel that increasing benefit costs will impact their ability to fund retirement and other financial goals, with better than one-in-four very concerned.

The need for financial planning. According to the survey, nearly nine in 10 (89 percent) respondents believe a financial plan that directly addressed their workplace benefit costs and contingent financial decisions would be helpful. Seventy percent of employees would be moderately or very interested in one-on-one financial planning if offered through their employer. Finally, more than four-of-five employees (81 percent) would take advantage of a financial planning option if their employer paid for a portion of it as part of the employee benefits package.

An employer-sponsored financial planning benefit option is also believed to have positive effects on workplace morale-related issues and would increase confidence in decision making regarding benefits. For example, employees overwhelmingly believe that a financial planning benefit would make them feel their employer recognizes and values their effort in the workplace (87 percent). And a similarly high percentage of workers indicate it is moderately or very important that they feel valued and recognized by their employer through the benefits offered in the workplace (83 percent).

According to the study, less than one-in-five workers have a written, professionally prepared and paid-for financial plan. Those who lack a financial plan are more likely to cut back on their saving and investments in company-sponsored plans when confronted with increases in out-of-pocket benefit expenses. Of those facing one or more benefit cost increases, 54 percent of those without a financial plan would reduce their retirement savings level, compared with 46 percent of those with a financial plan.

The study also found that financial planning helps employees get an earlier start with saving and investing in their company-sponsored retirement plans, and that they are more likely to contribute substantially throughout their life cycle. The percentage of employees contributing six percent or more to their 401(k) retirement plan increased in all age groups, but most dramatically for those under 35 years old, which increased from 35 percent to 46 percent.

For additional information on this and other HR topics, consult CCH Human Resources Management or Personnel Practices/Communications.

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