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How well are America's workers prepared for financial uncertainties and for the eventuality of retirement? In their own estimation, millions of employees haven't found a secure path to a bright future, whether that future begins in a retirement 40 years from now or at the end of the month, when the bills come due.
Those are the disturbing findings of a recent survey commissioned by insurer MetLife. To put the results in perspective, we polled personal finance experts across the country.
Workers Worry About -- But Don't Prepare For -- Illness, Disability and Retirement
The first finding of the MetLife study: Although American workers worry about how they'll pay bills when they're sick or in retirement, they don't do enough about it. Some 71 percent of respondents said they're "extremely concerned" about having enough money to pay bills during a sudden income loss, but only 60 percent of full-time workers have disability insurance.
Even those who do act to protect their future don't always approach the task logically. "Workers are trying to decide which mutual fund will be the next winner in their 401k without even having a real sense of how much money they are trying to accumulate for retirement," says Greg McGraime, a vice president and financial planner with JPMorgan Chase in New York City.
Employees Don't Save and Invest Enough for Retirement
Many Americans feel they're losing the retirement-planning game. Nearly half (45 percent) of survey respondents say they're behind schedule in their retirement savings, and three out of 10 full-time 21- to 30-year-old workers haven't even begun to stash something away.
"I see it as good news, in that it sends a message," says Walt Woerheide, a professor of investments at American College in Bryn Mawr, Pennsylvania. "People can be alerted while there's still time to make a decision about what standard of living they choose for today versus during retirement."
Some employers spur their workers to save by automatically enrolling new hires in the company 401k plan (individuals can opt out) or offering retirement accounts packaged with investment management services.
"With a managed 401k account, the employee hands over management of their retirement money to a service, which periodically rebalances the portfolio" as might be required by a new salary, advancing age or changing market conditions, says Don Bartolai, a principal in the Chicago office of Mellon Human Resources and Investor Solutions. The employee pays a substantial annual fee for these added services.
Voluntary Benefits Seen as a Good Thing
If workers can't get their employers to pay for financial protection like disability and life insurance, they can hope their company offers these as voluntary (read: employee-paid) benefits. In the survey, 62 percent of respondents say they like the convenience of paying for these benefits through payroll deduction.
There are other advantages to voluntary benefits. "When an employer can deliver a large group of employees to a service provider, it reduces the costs," Woerheide says. Workers also gain by simply being presented with a menu of financial services they might not otherwise consider.
Workers Say They Lack Access to Financial Education
A mere 40 percent of workers say they understand which company benefits meet their individual needs. This flies in the face of efforts some companies are making to demonstrate the value of benefits to employees.
"Through their HR departments or program vendors, employers these days are making a lot more tools available to employees to increase appreciation of what the programs are," says Pat Kendall, senior vice president of Diversified Investment Advisors in Newton, Massachusetts.
Some experts say most Americans simply don't understand the fundamentals of personal finance. "Unfortunately, our education system doesn't provide us with all the skills," says Gary Previts, a professor in the management school at Case Western Reserve University in Cleveland.
If you want to learn more, consider taking a course in personal financial planning at a community college, Previts advises. But always ask about the teacher's institutional affiliations; many financial planners teach classes to drum up business, and some may not give objective information, because they're beholden to their employers -- and to their own sales quotas.
