The financial and retirement confidence of working American adults is eroding, according to a new survey by PricewaterhouseCoopers.

Despite recent improvements in the economy, the aftereffects of the recession and slow economic growth continues to erode employees' retirement confidence and overall financial wellness, according to PwC US's 2012 Financial Wellness Survey.

Cash flow and debt management issues continue to top employees' financial concerns, with concerns about not having sufficient emergency savings for unexpected expenses (54 percent) and not being able to retire on time (37 percent) more than doubling from last year's results of 25 percent and 18 percent, respectively.

In addition, 49 percent of the nearly 1,700 respondents surveyed said they find it difficult to meet their household expenses on time, reflected in the 24 percent of the employees surveyed who said they are using credit cards to pay for monthly necessities they couldn't afford otherwise.

As a result of tight cash flow issues, 53 percent of the employees surveyed consistently carry balances on credit cards, up three percentage points from 50 percent in 2011. Additional financial concerns increased across the board from last year, including being laid off from work (22 percent vs. 11 percent), not being able to keep up with debt (14 percent vs. 13 percent), losing a home (7 percent vs. 5 percent), and not being able to pay for children's college educations (6 percent vs. 5 percent).

Cash flow issues are changing employees' spending habits: 66 percent of employees 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 percent said they subscribed to a "deal of the day" website.

Employees' financial stress remains high, not surprisingly. Overall, 61 percent of employees said they find dealing with their financial situation stressful, and 56 percent 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 Kent Allison, partner and national practice leader in PwC's Financial Education practice.

While there is a slight uptick in the number of employees saving for retirement— 67 percent compared to 65 percent in 2011—savings remain weak, with 40 percent of respondents reporting that they are saving less for retirement than last year. As savings dwindle, so does retirement confidence. More than half (53 percent) of employees plan to retire later than they previously planned (up from 46 percent in 2011), an increase reported by all age groups younger than 65 years of age.

The top reasons WHY employees expect to delay their retirement are because they haven't saved enough (60 percent), retirement investments declined in value (34 percent), or because they have too much debt (26 percent). Employees also report that they are saving less because of too many other expenses (25 percent), an increase in expenses (23 percent), or a decrease in income compared to last year (19 percent).

Thirty-five percent of the employees surveyed believe they will need to use their retirement plans to pay for expenses other than retirement, such as education funding or a home purchase, with results even higher for younger employees: 46 percent of those age 21-34 report the likelihood of using money held in retirement plans for expenses other than retirement. Nearly one-third (29 percent) 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."

Employees nearing retirement are underprepared. Of those employees age 55 to 64 who are planning to retire in the next five years, only about half (51 percent) know how much income they'll need in retirement and slightly more than half have examined whether they're on track to meet their retirement goal (55 percent)—yet only 19 percent of all respondents have sought the help of a financial professional.

"As the retirement industry shifts from defined benefit to defined contribution plans, financial responsibility is increasingly falling on the individual plan participant," said Allison. "However, despite efforts by employers to improve employee financial literacy around saving and investing for retirement, employees report continued discomfort with retirement planning and making investment decisions and short-term financial issues continue to be a significant obstacle to resolving the ever-growing retirement savings deficiency."

The high stress levels found among employees in the survey are encroaching into the work place: one-third of respondents admitted personal financial issues have been a distraction at work, with 97 percent of them spending time at work either thinking about or dealing with issues related to their personal finances. This is a significant increase over the 48 percent reported last year, adding to lost hours that impact employers' bottom lines.

Personal finances being a distraction at work was again highest among respondents ages 35 to 44. However, the income level of those most distracted has shifted from those earning more than $100,000 annually in 2011 to those earning $30,000-$49,000 in 2012, showing some signs of improvement at higher income levels but showing a growing concern for those earning less. This year, 40 percent of those earning $30,000-$49,000 reported that personal financial issues had been a distraction at work, a sharp increase from the 28 percent reported last year.

"While auto-enrollment, auto-escalation, and employer matching contributions help increase participation and savings in retirement plans, the survey shows that there are other pressing near-term financial issues that, if left unaddressed, may undermine a company's efforts to resolve the retirement savings problem," said Allison. "We've seen a gradual recognition among companies that a more holistic approach to financial wellness and education can help employees address competing financial goals and issues which, in turn, will not only help keep plan assets dedicated to meeting future retirement needs but also help free up additional capital to help combat the ever-rising cost of retirement. The benefit for employers is being able to maintain an engaged, healthy and productive workforce that will be more financially secure in retirement."

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