Anil Suri is a Managing Director for the Chief Investment Office at Merrill and Bank of America Private Bank, Nevenka Vrdoljak is a Managing Director for the Chief Investment Office at Merrill and Bank of America Private Bank, Rahul Rauniyar is a Director for the Chief Investment Office at Merrill and Bank of America Private Bank, Vanessa Metz is a Senior Vice President for Workplace Benefits, Bank of America and Audrey Chen is a Director for Workplace Benefits, Bank of America. Opinions are the authors’ own as of the date of the report and subject to change.
Our recent study on employee financial wellness sought to understand how 401(k) participants have fared from 2021 to 2023. Taking a gender, generational, and income perspective, we tracked financial wellness from six perspectives: expense management, credit card debt, saving for unexpected financial shocks, saving for retirement, managing long-term debt, and asset preservation.
Our analysis of three hundred thousand 401(k) participants on Bank of America’s record-keeping system shows that employees struggled to manage short-term expenses and to meet long-term financial goals. Women, lower-income employees, millennials, and Generation X members were most seriously affected during this period.
Our learnings can help employers better understand employee behaviors and financial needs, so they can better tailor workplace benefits programs that inspire employees to take action to help improve their financial health.
Key Findings
- Manage Expenses. A majority (59%) of employees live paycheck to paycheck, up from 52% in 2021. Only one-third (35%) of women versus 46% of men have money left over at the end of the month, down from 42% (women) and 53% (men) two years previously. Over half (54%) of employees track how they spend their money, and Gen Z (46%) and women (35%) are less likely to track spending than peers.
- Manage credit card debt. Over half (59%) of women and 47% of men don’t pay off their credit cards in full every month. Among lower-income employees who have credit cards, three quarters don’t pay off their credit cards monthly; 18% of Gen Z and 32% of lower-income employees have no credit cards.
- Plan for the unexpected. One-third (34%) of employees have less than one month of savings, up from 26% three years prior, with the rate higher (41%) for women than men (29%). Such low savings has risen for Millennials (39%), Gen X (34%), and Baby Boomers (22%), while there was no change for Gen Z. One-third (33%) of lower-income employees have no emergency savings, and two-thirds (67%) of lower-income employees have less than a month of savings, versus 17% among higher-income employees.
- Plan for retirement and other goals. Almost a third (30%) of women and 23% of men have saved less than $5,000 for retirement up, an increase from 21% (women) and 16% (men) three years earlier. Some 38% of Gen Z and 34% of Millennials contribute 5% or less of their pretax income to retirement plans, and a quarter (25%) of lower-income employees have zero retirement savings. A large majority (89%) of lower-income employees are not on track for retirement, compared to 72% of higher-income employees.
- Manage long-term debt. One fifth (20%) of women have student loans, versus 15% of men, and women are also more likely to have personal loans (15%) and payday loans (2%) compared to men. Almost half (45%) of lower-income earners and 24% of higher-income earners have no loans. Many fewer lower-income employees (10%) than their higher-income counterparts (56%) have mortgages.
- Preserve assets. Most (79%) employees have updated beneficiaries on accounts, thus ensuring asset protection should they pass away. However, lower-income employees (59%) are less likely to update beneficiaries, compared to higher-income employees (89%). Moreover, only 26% of men and 21% of women have a will, and relatively few have a living will: men (14%) versus women (12%).
Implications for Employee Financial Wellness Programs
Our study not only sheds light on employees’ overall financial health; it also can guide employers’ understanding of the financial challenges facing their workers.
In particular, workplace financial wellness programs can help close the gaps by highlighting how these will build financial health:
- The need to create and stick to a budget that tracks and categorizes spending;
- How important it is to pay off debt;
- How helpful it is to pay off high interest-rate credit cards first, and to repay in full each month;
- The need to set aside money and increase savings to cover possible income losses;
- The potential benefit of increasing the 401(k) contribution rate over time – even an additional percent or two can make a difference;
- Why it is critical to establish and update beneficiaries on all accounts and insurance policies.
Views of our Guest Bloggers are theirs alone, and not of the Pension Research Council, the Wharton School, or the University of Pennsylvania.
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The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”). © 2024 Bank of America Corporation. All rights reserved.
Workplace Benefits is the institutional retirement and benefits business of Bank of America Corporation (“BofA Corp.”) operating under the name “Bank of America.” Investment advisory and brokerage services are provided by wholly owned non-bank affiliates of BofA Corp., including Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”), a dually registered broker-dealer and investment adviser and Member SIPC. Banking activities may be performed by wholly owned banking affiliates of BofA Corp., including Bank of America, N.A., Member FDIC.
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