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Financial Wellness Program vs. Retirement Program | What is the Difference?

A financial wellness program differs in many ways from a typical retirement program, but it shares one key feature in common – it can prepare your employees for the future.
By MSA Staff

A financial wellness program differs in many ways from a typical retirement program, but it shares one key feature in common – it can prepare your employees for the future.

According to a study published by Metlife in 2019, 52% of employees believe that employers have a responsibility for the financial well-being of employees, and 54% of employees believe that employers have a responsibility to help employees save for retirement. Given this information, it is evident that the majority of employees expect companies to invest in their future beyond a paycheck.

What are the key differences between a financial wellness program and a retirement program, and why are financial wellness programs important to the lives of your employees and a more productive workplace?

Difference Between a Financial Wellness Program vs. a Retirement Program

At its most fundamental level, a retirement program is a system for setting aside money for retirement. It includes retirement accounts like 401(k)s and IRAs, that provide investors with tax benefits. Money is deducted from a paycheck automatically, and employers may offer a company match.

A traditional retirement program alone does not offer any sort of insight, coaching or guidance into how much employees need to save for retirement. For instance, a common mistake many employees make is contributing a static percentage from their paycheck year after year. Likewise, failing to contribute enough money into a retirement fund can delay or prevent the start of retirement altogether.

A financial wellness program can offer a plan that provides a variety of support, resources and personalized coaching to help employees reach their financial goals, both short-term and long-term. It includes education on retirement savings, as well as a host of related topics that are critical to the financial well-being of employees, such as:

  • Improving Credit
  • Debt Reduction
  • Building Savings
  • Buying a Home
  • Joining Incomes

How a Financial Wellness Program Addresses Retirement

How much money should I be setting aside for my retirement funds? What will retirement look like for me? Questions like these are top of mind for many employees.

Each employee’s financial needs and concerns look different, which is why a great financial wellness program needs to be uniquely customized to fit the needs of each employee rather than taking a one-size-fits-all approach.

Getting a sense for how much monthly income will be needed in retirement can allow employees to make decisions now that reflect their future lifestyle and goals.

  • Traditional Retirement – A traditional retirement requires saving early and often to meet a desired standard of living with the intention of leaving the workforce permanently by a certain age.
  • Semi-Retirement – For those looking to exit the hustle and bustle of their careers without giving up on work entirely, semi-retirement offers an ideal compromise. Semi-retirement can significantly extend retirement savings and requires a smaller amount of money each month.
  • Temporary Retirement – Temporary retirement has become a popular option for those looking to punctuate careers with short breaks for travel or pursuing meaningful hobbies. While this can be appealing to many, this type of retirement has an increased risk associated with it and requires complex financial planning to make it work. Retirement savings may never accumulate as high as other plans, but shorter periods of retirement can also make this unnecessary.

Obstacles to Retirement

Once employees have defined their type of retirement, they should identify how much they need to save to support that retirement plan. Sometimes, setbacks exist that prevent people from achieving their goals. A financial wellness program can help employees understand what decisions they need to make now to create their dream retirement.

  • Debt – One of the biggest setbacks to retirement, debt sharply reduces the amount of income an employee can make towards their retirement fund and is one of the first things that should be addressed when planning an employee’s financial future.
  • Family – Paying for a child’s college tuition, divorce, and even pets can provide unexpected expenditures that can delay retirement.
  • Emergency FundsAccording to the Federal Reserve, 12% of adults would be unable to pay their current month’s bills if they had an unexpected $400 expense. Developing an adequate emergency fund can help ensure that unexpected bills, like a natural disaster or a surprise medical bill, don’t derail your future.

A Retirement Program Builds Your Employee’s Future, a Financial Wellness Program Ensures It

While nobody can predict the future, retirement offers an assurance that at the end of employment, individuals are able to live the way they want. A financial wellness program can help outline what individuals are looking for in retirement and create actionable goals paired with coaching to ensure an ideal retirement.

At My Secure Advantage, we offer services that put your employee’s financial needs first. SHRM found that 69% of full-time employees have made improving their financial health their top priority, and 88% of employers have begun taking steps to understand their employee’s financial needs.

By surveying your employees’ financial health, we are able to develop custom approaches to help them achieve their retirement goals.

Contact us today for more information about our services.

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