6 Ways Your Employer Can Contribute to Your Financial Wellness
To help employees gain better control over their finances, more and more employers are offering financial wellness benefits as part of their compensation packages. The number of employers that offer financial wellness programs through the workplace is expected to nearly double within the next few years, according to research from Massachusetts Mutual Life Insurance Company .
So, while employers continue to implement financial wellness programs, what does this mean for you? In this post, we’ll define financial wellness and the important role it plays in the workplace as well as breakdown some of the benefits you can expect to see from employers and how to use them to your advantage.
We’ve also added some suggestions submitted by our Twitter followers participating in SoFi’s #MoneyMonday sweepstakes prompt “What additional benefit would you like your employer to offer?”
What is Financial Wellness?
Financial wellness is balancing your current financial well-being and tackling daily tasks while preparing for a secure financial future. This includes addressing behaviors that promote positive financial decision-making as well as identifying those that might negatively impact an employee’s financial situation.
Since financial goals and priorities will change throughout an employee’s life, it’s important to grasp the concept of money management and to adapt when goals and objectives change.
Employers Have a Big Impact on Financial Wellness
Finances touch every aspect of employees’ financial lives. Employees who are more in control of their finances may be more productive and focused in the workplace.
Employers who understand the importance of financial wellness can provide personal workplace benefits, tips for improving your financial health, and offer access to guidance that will help improve employees’ financial lives at large.
Financial Wellness Benefits Offerings
Employers offer a variety of benefits that help employees’ financial lives in a myriad of ways. Here are some of the benefits offerings you may encounter as part of a financial wellness program in the workplace.
A 401(k) Match
The most popular benefit our Twitter followers said they’d like to see offered by their employer was some sort of 401k benefit.
“DEFINITELY a 401k match program !!!” – Cliff P.
“I would love employer matches on 401K contributions!” – Carey C.
According to the IRS , “A 401k is a feature of a qualified defined contribution plan that allows employees to contribute a portion of their wages to individual accounts.”
Essentially, employees and employers can contribute to a retirement savings account sponsored by the employer.
Although 401(k) plans make it simple for employees to start saving for retirement, some companies will match contributions up to a certain amount to give employees an extra retirement-savings boost.
“A 401(k) or similar employer-sponsored retirement plan can be a powerful resource for building a secure retirement—and an employer match can add a substantial amount to an employee’s nest egg.”
For example, if your employer matches your contributions dollar-for-dollar up to three percent of your salary, your savings may double if you take full advantage. Assuming the investment in the account doesn’t increase, if you set aside $42,000 by the time you retire, you will have set aside $84,000. The extra $42,000 is essentially free money.
Financial Planning Education
Financial planning education is one of the top financial well-being initiatives that many companies offer. From helping employees select the right investments for their 401(k)s to providing a platform to help employees manage their day-to-day expenses, companies may offer a wide range of tools, resources, and services to help employees manage their money.
While receiving a 401(k) match or additional financial support is great, it may not be as useful as gaining the knowledge of how to manage your money. Taking advantage of a financial planning education benefit may help you navigate your finances for years to come.
Here’s what some of our Twitter followers suggested they’d like to see added to their benefits package:
“Financial wellness classes for all employees.” – Patrice
“Seminars on retirement plans.” – Karen B.
Funds for Emergencies
For employees who need to pay for emergency expenses such as damages due to a car accident or home repair, employers may offer employee relief or compassion funds. Some employers are matching contributions to an employee’s personal account, offering payroll advances, and short-term loans that can be repaid through payroll deduction.
Offering these programs may make it less likely for employees to tap into their retirement savings if they have cash reserves or assistance accessible. Therefore, employees can shift their focus to long-term savings and retirement planning.
Here’s one idea from a follower on Twitter:
“Right now a good benefit would be unemployment insurance through the workplace so we could fund our own emergencies…” – Billy
Healthcare Savings Accounts
Overall healthcare costs — including all private and public spending — are anticipated to rise by an average of 5.5 percent per year over the next decade — growing from $3.5 trillion in 2017 to $6 trillion by 2027 .
As healthcare costs continue to rise, many employees may feel the financial weight of affording medical expenses. While many employees may not consider healthcare a financial wellness benefit, employers who offer support can ease the financial burden of healthcare costs now and in the future.
Some employers offer a Health Savings Account (HSA) in conjunction with high-deductible health insurance plans. An HSA is a tax-advantaged account that helps employees prepare to pay for healthcare costs such as doctors’ visits or prescriptions. HSAs have several other benefits including:
• Pre-tax contributions, potential gains, and withdrawals can be used for qualified medical expenses and are exempt from taxation.
• The unused balance car carries over into the next year.
• Funds in HSA accounts can be invested which may provide long-term growth potential to afford future healthcare costs.
• The funds in the account never expire and will pass to a beneficiary upon the account holder’s passing.
While employers are not required to offer a high-deductible health insurance plan in conjunction with an HSA, many employers do offer this benefit. If your employer does, it’s wise to explore how an HSA may be beneficial to your financial wellness.
Nearly half of employees perform some type of caregiving activities.
That’s why Twitter follower Maddy claims she’d love to see a “daycare/preschool assistant” added to her employer’s benefit package.
Caregiving tasks such as taking someone to a medical appointment, buying groceries, preparing meals, or paying bills can take a financial toll on many employees. Caregiving can also impact productivity and workplace performance.
Therefore, employers who offer caregiving benefits may lessen the financial and time demands that caregiving requires. Some benefits may include:
• Sick days or paid leave to care for a loved one
• Flexible schedule to accommodate caregiving needs
• Work from home flexibility
So, whether you’re caring for a child or an aging parent, ask your employer about the benefits they offer to help with your caregiving needs.
Student Loan Repayment
The latest student loan debt statistics for 2020 show how serious the student loan debt crisis has become for borrowers across all demographics and age groups. There are 45 million borrowers who collectively owe nearly $1.6 trillion in student loan debt in the U.S. Student loan debt is now the second highest consumer debt category – behind only mortgage debt – and higher than both credit cards and auto loans.
With so many Americans paying off student debt, some employers are offering an employer student loan repayment program to help with repayment. From increasing compensation to account for current debt payments or matching payments up to a certain amount, employers are implementing strategies that are helping their employees eliminate their debt.
Here’s what one of our followers on Twitter had to say:
“One benefit my employer could offer is a percentage each month towards my student loans. Fingers crossed it happens in the near future!” – Betty
If you’re repaying your student loans and your employer offers a student loan repayment benefit, it can really help with the most burdensome student loan payments.
If your company doesn’t offer some sort of financial wellness benefit, they may provide other incentives such as annual raise opportunities, referral bonuses, or professional development training.
If your options are limited, you may want to speak with your employer to determine if they are willing to offer any of these benefits to improve your financial well-being.
Taking Advantage of Financial Wellness Benefit at Work
Whether you’re looking for a new job or you have worked in your position for years, it’s important to understand all benefits an employer offers. Sometimes even if you have worked at an organization for years, you might not be aware of all of the financial wellness benefits available.
Taking full advantage of all benefits offered may help improve your financial well-being and future financial security.
But, keep in mind, your employer’s financial wellness benefits may not be the only solution available. In the instance your employer doesn’t offer help repaying your student loans, you may want to consider student loan refinancing as a way to deal with student loan debt.
Student loan refinancing is when you consolidate your student loans with a private lender and receive new rates and terms. While the exact process can vary by lender, the general idea is that a borrower consolidates their existing student loan debt with a new loan, and qualifying borrowers might be able to secure a lower interest rate. It is important to note that if you do choose to refinance your federal student loans, you forfeit your ability to qualify for federal benefits.
Borrowers interested in refinancing their student loans may want to consider SoFi. You can check your rates in just two minutes.
Student Loan Refinancing
If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. (You may pay more interest over the life of the loan if you refinance with an extended term.) Please note that once you refinance federal student loans, you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans, such as the SAVE Plan, or extended repayment plans.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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