62% of employees cut their savings amid concerns about the economy

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Employee 401(k) accounts may have taken a hit during Recent market volatilityHowever, this is not the only reason for the decline in stocks.

a A new study from Morgan Stanley at Work It found that 62% of employees have reduced their contributions to short- and long-term savings amid rising inflation and concerns about a possible recession.

Nearly a third – 31% – of respondents reduced their contributions to 401(k) plans. Meanwhile, 26% said they reduced their debt repayments, 25% reduced their long-term savings, 24% reduced their emergency and short-term savings, 19% reduced contributions to health savings accounts, and 13% reduced contributions to a college provident fund.

Furthermore, 71% of employees said money-related stresses negatively affected their work and personal lives, an increase of 7% from 2021. Meanwhile, 84% of HR leaders said they were concerned that personal financial issues were affecting employees. productivity.

The survey was conducted online between July 13-19 and included 1,000 adult employees and 600 HR leaders.

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Aiming to contribute “the most you can do”

The decline in savings is worrisome, as “more wealth is being created in the workplace than anywhere else,” according to Brian MacDonald, president of Morgan Stanley at Work.

This includes 401(k), deferred compensation plans, employee stock ownership plans, emergency savings accounts, and student loan assistance.

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“Employees still see their 401(k) plan as the central thing they think of when they think about benefits at work,” MacDonald said. “That certainly has not changed.”

MacDonald said the fact that employees have reduced their 401(k) contributions on an annual basis is troubling, because they miss out on the full benefit of their work retirement plans and compound interest that can help them build wealth over time.

Start by maximizing the most you can do — not the maximum allowed, but the maximum you can do — in your 401(k) plan.

Brian MacDonald

Morgan Stanley’s boss at work

Granted, MacDonald said, allocating money to long-term goals can be difficult due to rising costs such as rent and school fees.

“Start by maximizing the most you can do — not the maximum allowed, but the most you can do — in your 401(k) plan,” MacDonald said.

Financial wellness benefits ‘gaining momentum’

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Company executives are doing more to provide comprehensive financial benefits to employees and spending more money on those benefits, according to MacDonald.

“The conversation is more about financial well-being, and this trend is definitely gaining momentum,” MacDonald said.

The survey found that 60% of employees pay more attention to reviewing their financial benefits than last year.

Furthermore, 84% of HR leaders say employees have requested financial benefits that their companies do not offer, up from 78% in 2021.

That’s even when the survey found that more CEOs now say their companies offer high-quality financial benefits.

However, 96% of HR leaders said their companies need to do more to help employees better understand how to maximize the financial benefits available to them, up from 93% who said the same thing last year.

Meanwhile, 89% of employees agree, up from 87% in 2021.

When it comes to financial benefits, the best option mentioned by employees was access to a financial advisor at 52%; It is followed by goal-based retirement investment planning at 48%; and access to retirement tools and calculators, 46%.

However, HR leaders indicated different priorities, with goal-based retirement investment planning ranked first at 47%. Followed by access to retirement planning tools and calculators, at 43%; Retirement planning workshops 40%; And access to a financial advisor 40%.