Every year, professional-services giant PricewaterhouseCoopers conducts its Employee Financial Wellness survey to gauge how U.S. workers are doing with money. And in this segment from Motley Fool Answers, Alison Southwick and Robert Brokamp talk to guest Kent Allison, National Leader of PwC's Employee Financial Wellness Practice, about what's stressing out American workers, both broadly and generationally. And just as important, what can employers do to help?
A full transcript follows the video.
This video was recorded on June 6, 2017.
Robert Brokamp: So what are people stressing about? Is there a group of people that is more stressed than others? Because in your report you looked at the generations of millennials, Gen X, and the baby boomers.
Kent Allison: It's interesting. Across all generations, the No. 1 cause of stress consistently over -- I think we've been doing this survey seven years -- is the lack of, kind of, an emergency fund. The inability to deal with a small financial shock to their finances. So whether it's medical, or even a car breaking down, it disrupts their entire finances. So that's the No. 1 cause of stress.
Generationally, that's a toss-up. We've been seeing kind of a fluctuation between millennials and Gen X, and two different reasons: Millennials are dealing, really, with the cash flow and debt issues, especially student debt, and the struggle of living paycheck to paycheck.
Gen X, I like to kind of compare them to tweeners. They're in between the boomers and the millennials, and they're suffering from both ends of that, in the sense that they're trying to take care of their kids and they're also finding themselves taking care of aging parents, while also trying to deal with their own personal finances. So they've got kind of unique stresses going on, because they're getting hit from both sides.
Brokamp: What can employers do about it?
Allison: Well, it's interesting. We're seeing a change going on just because of the recognition that even though employers tried to fix the retirement-savings deficiency issue through planned design -- auto-enrollment, auto-escalation, looking at target-paid funds to help with the investment side, looking at kind of how to make it last through potential annuities -- the reality is it's all starting to look like a defined benefit plan, but they're just not funding it.
So they've all tried to do it through plan design, but I always say you're forcing people into the plan, you're escalating their contributions, and then you're watching it come out through loans and withdrawals. And the reason for that is that you really never solved for what was causing the problem in the first place, which was essentially cash flow, debt issues, and other competing priorities.
So by forcing them into the plan, you may have exacerbated a situation at home where they're living paycheck to paycheck, and now you're forcing the plan, and now they're going back into those funds to help resolve those needs through the loans and withdrawals.
Brokamp: Yeah, that was one of the eye-opening findings of the survey. How many people have taken early withdrawals from their retirement plan? Something like 44% expect that they're going to have to because of unexpected expenses and healthcare expenses.
Allison: Yep, and it was funny, because last year we saw the numbers and we compared this year to last year, and Gen X kind of jumped up in terms of the numbers that actually took withdrawals out. And we looked at last year's number and Gen X told us that they were planning on doing it, so it was kind of, hey, look. They actually did it.
Brokamp: They're self-aware -- very self-aware.