Over the last year, the impact of inflation and economic uncertainty has contributed to increased financial stress, leading many employees to focus on short-term financial needs instead of saving for retirement. 
That’s one of the key findings from Bank of America’s 13th annual Workplace Benefits Report, which examines trends related to employee retirement preparedness and financial wellbeing. The findings are based on nationwide surveys conducted during the first half of the year among more than 1,300 employees and nearly 800 employers.
The report revealed that more than two-thirds (67%) of employees believe the cost of living is outpacing growth in their salary or wages, compared to 58% in February 2022. In turn, this increased financial stress has led to a drop in perceived financial wellness among employees, from 57% in February 2022 to 42% in 2023—the lowest rate since Bank of America began the research in 2010.
Shifting Attitudes
Consequently, concerns about the economy are eroding confidence in retirement readiness. Notably, 63% of employees and 71% of employers agree that economic uncertainty will affect their current and future workplace benefits and 401(k) retirement plans.
Moreover, fewer employees (31%) are prioritizing long-term retirement savings—down from 45% in 2022—as a growing number are focusing on short-term financial needs, including paying off credit card debt (16% vs. 11% in 2022) and saving for the unexpected (13% vs. 8% in 2022).
When looking at the findings by gender, women are feeling the weight of financial stress more so than men. Only 38% of women feel financially well in 2023, a decrease from 55% in 2022—and a five-year low. In addition, 54% feel they won’t be able to make ends meet due to inflation, compared to 32% of men; and 39% have had to look for additional employment due to rising costs, compared to 17% of men.
Meanwhile, nearly half of employees (45%) say they are not saving specifically for health care. Confidence in managing health care costs has also decreased to 16% compared to 27% in 2022, and only 7% plan to start contributing to an HSA to help address the future cost of health care.
Cautious Optimism
That said, there are signs that longer-term goals like retirement are still on their radar, and if both employees and employers alike are indicating interest in wanting to do more to improve retirement readiness. In addition, more than half (56%) of employees remain cautiously optimistic about their financial well-being over the next two to three years.
“American workers continue to feel stressed about their finances and are concerned about keeping up with the cost of living,” said Lorna Sabbia, Head of Retirement and Personal Wealth Solutions at Bank of America. “Companies who show a sense of urgency for their workforce by offering financial wellness programs and resources which support employees’ immediate needs and overall well-being will continue to stand out as employers’ of choice.”
To that end, employees continue to look for support from their employers, with most employees (76%) and employers (96%) agreeing that employers are responsible for employee financial wellness. However, only 2 in 5 employers currently offer financial wellness programs. There is also an appetite among employees to improve their understanding of Social Security, as 30% say they have little to no understanding of their projected benefits.
The Evolving Workplace
Additional findings show that, while employers report lower employee attrition rates this year compared to 2022, staffing continues to be a challenge. Nearly a third of employees (32%) say they switched jobs or considered leaving their company in the past year, with burnout (53%), size of pay increases (44%), and work-life balance (41%) cited as the top reasons.
Meanwhile, more than half of employers currently have an in-person work model (55%), followed by hybrid/mix (39%) and fully remote (6%) models. However, in the next three years, more employers plan to shift to hybrid/mix (47%) and remote (17%) models, while fewer (36%) plan to maintain a fully in-person model.
As to action steps to consider, Bank of America’s report suggests several ideas to help improve financial wellness and promote retirement readiness, including:
- Adding automatic features to help make it easier for employees to contribute to their 401(k) and invest for the long term.
- Establishing an employer match for your 401(k) plan and making contributions to employees’ HSAs.
- Offering employees digital tools that connect them to guidance and retirement income resources.
- Expanding educational programs on planning for retirement and including information on Social Security and Medicare.
- Working with your benefits provider to analyze plan data to uncover disparities among different employee segments and to explore plan design options that could help close the gaps.
Bank of America’s 2023 Workplace Benefits Report is available here.
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