U.S. employees aren’t confident about reaching their long-term financial goals, and are forced to draw on their 401(k) retirement savings for more immediate needs, according to a new survey by PwC.

PwC US’s 2018 Employee Financial Wellness Survey found employees are feeling stress over uncertainty regarding health care and the need to support both aging parents and adult children. Despite those concerns, the strong economy is helping reduce stress levels to some extent, according to the annual survey.

“We’re showing stress levels down,” said Kent E. Allison, leader of PwC’s Employee Financial Education & Wellness practice. “They’ve dropped from 53 percent to 47 percent of people saying they are suffering from financial stress.”

Employee financial stress

The focus has shifted away from day-to-day worries to long-term stresses, he noted. “We are seeing a favorable trend as a result of the economy and the stock market and the interest rates staying pretty much at historical lows,” said Allison. “We’ve seen some increase in salaries. Overall things are certainly looking better, but there are still some pretty significant concerns around whether people are going to change some of the behaviors that cause them to be in stressful situations in the first place.”

Some of the stresses include having enough money set aside for emergencies and the worries caused by debt. “There’s still a high percentage of people who are carrying credit card balances, even though it’s declined a little bit,” said Allison. “If in fact interest rates do increase, naturally anything that’s a variable rate could cause issues with regard to the stability that we’re starting to see. Certainly health care is continuing to be a concern.”

The survey also found generational differences. “We have all generational levels, but even more of a focus on baby boomers as they start to head towards retirement,” said Allison. “It’s becoming more and more of a concern from the standpoint of why they might defer retirement. Some generations are starting to recognize the concerns of their elders, and some of the maturing millennial population is starting to realize some of the challenges that the Gen X generation or the baby boom generation has with regard to supporting older parents. Also, from the standpoint of parents supporting adult age children, all of these things are coming out in the survey as a growing issue, ultimately leading to a higher degree of financial stress across the board and poor financial behaviors: higher credit card balances, more debt, more stress around not having an emergency fund, and so forth.”

Nearly one in four employees is providing financial support for their parents or in-laws, according to the survey, and they face additional financial challenges compared to other employees. More than twice as many of them use credit cards to pay for monthly necessities they couldn’t otherwise afford, while nearly three times as many admitted their finances have been a distraction at work or that their productivity at work has been affected by their financial worries. They are also more than twice as likely to have withdrawn money from their retirement plans to pay for non-retirement expenses.

The results for those who are either taking care of aged parents or are taking care of an adult child are far worse than those who don’t have those issues, Allison noted. “We’re seeing a growing trend as people grow older and have longer life expectancies,” he said. “That becomes more of a challenge.”

Health care challenges and student debt continue to cause stress. “With the student debt situation, more and more people are carrying that debt well into their adult lives, and it’s causing some challenges that parents feel an obligation to help out,” said Allison.

The survey found that 26 percent of the respondents have withdrawn money already for something other than retirement from their retirement plans, while another 42 percent think it’s likely they will need to do so. “That number increases for millennials,” said Allison. “When we look at what they’re using it for, it’s not for purchase of a home. It’s generally to deal with unexpected expenses and medical bills. It still comes down to the number one cause of stress, which is not having money set aside for an unexpected emergency. For the many years we’ve done this survey, that’s continuously the number one issue and concern in what causes the most stress. That need to have savings set aside for those unexpected expenses is a key component of the solution that needs to be put in place to resolve the stress. If they’re raiding their retirement plans, it’s not a good thing in terms of ultimately meeting what their objectives are, which is to make their retirement work.”

The number of millennials who are raiding their retirement accounts is rising compared to older generations. “Part of the challenge there is the people who have assets put aside are generally going to be the baby boomers and Gen Xers,” said Allison. “The growth in the stock market is favorably impacting the baby boomers and the Gen Xers more than the millennials because they have more invested in the stock market through their 401(k) plan. The relief for Gen Xers was probably greater than for millennials with regard to the increase in the stock market. When it comes down to having money set aside and being able to adapt to an emergency, those with the assets will be able to adapt a lot better than those without. Those without ultimately will look at the only asset they have, which may be the retirement plan, and ultimately pull out from it.”

There were also gender differences, with 52 percent of women saying they do not have enough emergency savings for unexpected expenses compared to 42 perent of men.

Financial distress could have an impact on how well employees perform at work and whether they decide to remain in the job.

“Those all have direct impact on the ROI factors for an employer,” said Allison. “People are less loyal, and they’re more likely to change jobs and jump for a salary increase because they’re dealing with financial stresses. They’re less productive at work. They’re more distracted at work. The hours they spend focused on their personal finances are all dramatically higher. From a physical wellbeing side, they’re also less physically well than those without those issues, so it has a dramatic impact on the company when these issues are prevalent in their employee base.”

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