Despite recent improvements in the economy, the hangover effect from the recession and slow economic growth continues to erode employees' retirement confidence and overall financial wellness, according to PwC US's 2012
As a result of tight cash flow issues, more than half (53%) of employees consistently carry balances on credit cards, up three percentage points from 50% in 2011. Additional financial concerns increased across the board from last year including being laid off from work (22% vs. 11%), not being able to keep up with debt (14% vs. 13%), losing a home (7% vs. 5%), and not being able to pay for child(ren)'s college (6% vs. 5%).
Interestingly, cash flow issues are changing employees' spending habits: two out of every three employees (66%) are choosing to do without things they had previously been purchasing. The same number of respondents started using, or are using more frequently, coupons to purchase day to day necessities, and 28% subscribed to a "deal of the day" website.
Not surprisingly, employees' financial stress remains high: overall, 61% of employees find dealing with their financial situation stressful, and more than half (56%) report that their stress level related to financial issues has increased over the past 12 months.
"The study is evidence that employees are still very much burdened by day-to-day financial concerns," said
Retirement savings weak in face of competing financial issues
While there is a slight uptick in the number of employees saving for retirement - 67% compared to 65% in 2011 - savings remain weak with 40% of respondents reporting that they are saving less for retirement than last year. As savings dwindle, so does retirement confidence: more than half (53%) of employees plan to retire later than they previously planned (up from 46% in 2011), an increase reported by all age groups younger than 65 years of age.
The top reasons employees expect to delay retirement are because they haven't saved enough (60%), retirement investments declined in value (34%), or because they have too much debt (26%). Employees also report that they are saving less because of too many other expenses (25%), an increase in expenses (23%), or a decrease in income compared to last year (19%).
More than one-third (35%) of employees believe they will need to use their retirement plans to pay for expenses other than retirement, e.g. education funding or a home purchase, with results even higher for younger employees: 46% of those age 21-34 report the likelihood of using money held in retirement plans for expenses other than retirement. Nearly one-third (29%) of respondents have already withdrawn funds from their retirement plans to pay for other expenses.
"Competing financial issues are pressuring employees to deprioritize retirement funding by saving less or in some cases, not saving at all," said Allison. "Employees are being forced to extinguish more immediate fires - such as making a monthly credit card payment or paying a child's college tuition - over retirement saving, which from a long-term perspective is highly risky behavior that can leave employees severely underfunded for retirement as they deal with increased longevity and rising healthcare costs down the road."