Financial Mindset Study

Transcription

1 Aon Hewitt Communication Financial Mindset Study TM Insights Into Employees Financial Perceptions and Behaviors Risk. Reinsurance. Human Resources.

2 Table of Contents About This Study What We Discovered... 2 What Can Employers Do? The Details... 5 What Is the Current Financial Mindset?...6 What Is Important to Employees? What Are Employees Doing (or Not Doing)? What Do Employees Really Want?...28 Who Responded Additional Insights Meet the SAVING Well Segments Aon Hewitt s Mindset Research....46

3 About This Study Aon Hewitt s Financial Mindset TM Study comprehensively explores employees financial and savings attitudes and behaviors, including confidence, literacy and engagement, saving intentions, retirement benefits, and communication preferences. This report answers the following key questions: What is the current employee mindset around finances and saving? What are employees most important financial priorities? Are their priorities consistent with their behavior? In what ways do employees want help and education, and how can you best reach them? The answers provide insight into what you can do to educate employees and their families, drive engagement in financial benefits, and facilitate smarter planning and actions. This inaugural study is based on an online survey administered in the U.S. by The Futures Company, a market research and trends firm. A representative group of 2,001 workers at companies with at least 1,000 employees completed the comprehensive survey. A profile of the respondents is provided later in this report. This report includes charts that reflect the primary insights from the survey. In addition, we highlight areas of notable differences in three areas: Gender Income Generation Men Women < $35,000 $35,000 $64,999 $65,000 $99,999 $100,000 Boomers: Born Gen Xers: Born Millennials: Born Aon Hewitt 1

4 What We Discovered The collective financial mindset of U.S. workers has shifted. After a difficult recessionary period, employees are moving from a sense of doom and gloom to one of optimism and anticipation. Economic anxiety is declining and feelings about financial security are improving. Perception May Not Reflect Reality Optimism prevails among employees, but is the reality as positive? Many employees see themselves as financially savvy; more than two-thirds say they are in control of their financial futures. Yet nearly three-fifths of employees describe themselves as just getting by or experiencing financial difficulties. We see other contrasts too: They say they are focused on the long term, but debt is a problem and the majority have not done adequate longterm planning or used retirement modeling tools. They say they are savers, but retirement plan participation is still a challenge. Employees generally have good intentions when it comes to their finances, but there is still a sense of being overwhelmed. Understanding the contrasts between what employees feel, say, and do, provides valuable insight into how employers can help facilitate positive financial behaviors. Employees Want Help Employees want help with their finances not just with saving for retirement, but with broader financial wellness considerations such as preparing for an emergency, saving for education, and saving for short- and long-term wants and needs. The strongest desire is for unbiased financial advice provided through the employer employees want someone to tell them how they re doing and what they should do to get on track for retirement, as well as to help them manage their day-to-day financial situations. Employees are looking for guidance and reassurance, and they are motivated by wanting to do the right thing. There is a strong willingness to accept help from their employers. They are looking for their employers to make it as easy as possible to make the right decisions about all aspects of their finances. Differences Drive Opportunities When looking at how employees feel about financial matters, the demographic differences that are revealed provide many opportunities for employers. For example, Millennials tend to be more optimistic than the other generations, so that should set the tone of your communications to this group. Women tend to express more feelings of financial insecurity and loss of control, so providing one-on-one help and education to address their unique needs can prove effective. By understanding what employees are thinking and doing, you can better help your employees confidently manage their financial lives today while also preparing for the future and anything unexpected along the way. 2 Financial Mindset TM Study

5 What Can Employers Do? Evidence is clear that implementing plan design features such as auto enrollment, auto escalation, and rebalancing can be effective in driving positive behavior in defined contribution plans. The use of financial guidance tools has been shown to improve outcomes for participants as well. But what else can you do based upon the financial mindset of employees? Here are a few recommendations. Develop a Financial Wellness Strategy Your financial wellness strategy should articulate your objectives for the financial wellbeing of your employees (and their families), your role in helping employees achieve financial wellness, and the employee s role. It should complement any broader wellbeing strategy the company may have. Offer a Full Suite of Independent Financial Planning Tools Expand your retirement tools and education to offer a full suite of independent financial planning tactics. And be sure to address the diversity of your population, factoring in gender and life-stage needs and preferences. Promote What You Have Employees overwhelmingly indicate they want help from their employers, but often they do not even know what is available. Completing an audit of your current tools and resources (among all your vendors) can help you promote the right tools to the right people at the right time. Provide Relevant and Ongoing Education To drive the actions most critical to your organization and your people, personalize your communication and education to employees behaviors, preferences, and financial wellness situations. And use an array of media channels, including high tech and high touch, to reach your diverse population. Learn More About Your Employees What They Think, What They Want The more you know, the more you can do. Look beyond the behavioral data of your retirement plan and consider employee research options like attitudinal segmentation (see page 42) and employee listening to dig deeper into what your employees think and want or to test ideas you might have to ensure that they provide real value to your employees. Aon Hewitt 3

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7 The Details An employee with fewer money worries is a better employee. Guide me along the way. Help me figure out how to make financial decisions that make my overall life enjoyable. Let me know if I m on the right course with my planning for the future. I feel my employer should offer a package that includes an investment advisor plan and some education on how to manage, save, and plan my money. Aon Hewitt 5

8 What Is the Current Financial Mindset? Employees are optimistic but want to feel more confident when it comes to their financial situation. Employers should provide basic, easyto-access financial education to improve financial literacy and security among employees. 6 Financial Mindset TM Study

9 I m in control of my finances and pretty savvy, but I m still intimidated by some aspects of finances. A majority of respondents indicated that they feel in control of their financial future (73 percent) and describe themselves as financially savvy (65 percent). These positive perceptions were higher among men than women and also higher among Millennials than other generations. However, despite describing themselves as financially savvy or feeling in control, about half of Millennials indicated that they feel intimidated by financial matters. Women also feel more intimidated by financial matters than men and are less likely to feel in control of their financial futures or describe themselves as financially savvy. Financial Viewpoint (Strongly Agree or Agree) I feel I m in control of my financial future 73% I d describe myself as financially savvy 65% I m often intimidated by financial matters 41% 0% 20% 40% 60% 80% 100% Men (79 percent) feel more in control of their financial future than women (67 percent). Millennials especially see themselves as savvy with 74 percent agreeing with this statement. Women are more likely to feel intimidated by financial matters (46 percent) than men (36 percent), as are Millennials (49 percent). Aon Hewitt 7

10 It s important to be debt-free, but I don t always keep my credit card spending in check. Although nearly four-fifths say it is important to be debt-free, about one-third say their level of debt is ruining their life. Across generations and gender, respondents overwhelmingly recognize the importance of keeping credit card usage in check and striving for a debt-free lifestyle. Perceptions About Debt (Strongly Agree or Agree) It s important for me to be debt-free 79% I do a good job of keeping my household s financial affairs in order Credit cards make it too easy to spend more than I want to 44% 54% My level of debt is ruining the quality of my life 30% 0% 20% 40% 60% 80% 100% Who are the debt-burdened? Not surprisingly, the nearly one-third experiencing the heaviest burden of debt are more likely to have less education, earn less income, and be less disciplined in their credit, spending, and regular saving. They are more worried about saving for the future and keeping up with the cost of living and don t understand where to save. That said, they are equally likely to say being debt-free is important, contribute to their retirement plan, and engage with their retirement plan. Employers should consider helping this group connect with others in similar circumstances, create a budget, and provide tools to help curb spending. 8 Financial Mindset TM Study

11 I opt to save when given the opportunity. We asked employees what they would do if they received an unexpected gift of $1,000 would they save it, spend it, or do a little bit of both? A majority of employees (51 percent) indicate that they would save at least part of the gift. About one-quarter of employees (24 percent) would spend all or most of it, showing a general propensity toward saving. If I received $1,000 unexpectedly, I would Those with $35K $64K household income are more likely to spend (27 percent). Save/invest nearly all of it Save/invest most of it, spend some of it Spend about half, save/invest about half 24% 24% 27% 25% 11% 13% 51% Men (54 percent) and Boomers (57 percent) are more likely to save. Spend most of it, save/invest some of it Spend nearly all of it Aon Hewitt 9

12 I think I m doing fairly well today, but I m really just getting by. Most employees (74 percent) feel their personal financial situation is going at least fairly well and are reasonably secure about their financial situation, though about one-quarter (26 percent) are considerably less positive. Millennials in particular are more likely to feel that they are in a good place financially. Respondents whose household income is over $65K, and men are significantly more likely to say their personal financial situation is going fairly or very well. How My Personal Financial Situation Is Going Very Well Fairly Well 15% 59% Higher among Millennials, those with a household income of $65K or more, and men. Poorly Very Poorly 4% 22% Higher among those with a household income of less than $65K and women. 0% 20% 40% 60% 80% 100% Though the majority of employees express generally positive perceptions of their current financial situation, just over half also say they are either just getting by (44 percent) or having financial difficulties (13 percent). A significant difference was observed among the men and women who felt financially comfortable with 50 percent of men reporting that they were, compared to only 36 percent of women. How I Describe My Current Financial Situation I m experiencing financial difficulties. 13% I m financially comfortable. 43% I have just enough to get by. 44% Men: 50 percent Women: 36 percent 10 Financial Mindset TM Study

13 I m optimistic about the future. Even though most respondents identified some challenges when it came to their personal financial situations or retirement, the majority expressed optimism about the future. Boomers and those with a household income under $35K were the subgroups most likely to be pessimistic about the future. Feelings About the Future: Level of Optimism Completely pessimistic about the future Completely optimistic about the future Rated 0 4 Rated 5 7 Rated % 46% 35% Boomers (24 percent) and those with a household income under $35K (31 percent) were more likely to be pessimistic. Men (38 percent), Millennials (43 percent), and those with a household income over $65K (40 percent) were more likely to be optimistic. Aon Hewitt 11

14 What Is Important to Employees? Employees are concerned about their short-term and longterm financial needs, and they want to be seen as financially responsible and prepared. Employers should provide a variety of tools and resources to meet the diverse needs of their people and help them take appropriate steps toward a more confident financial future. 12 Financial Mindset TM Study

15 I m more worried about the cost of health care and saving for the future than I am about short-term financial needs. When asked about worries, employees listed the cost of health care (48 percent), saving for the future (44 percent), and keeping up with the cost of living (36 percent) as their top three concerns. In general, women are more worried than men. Boomers (52 percent) and Gen Xers (49 percent) tend to be most worried about health care costs, while Millennials tend to be most worried about saving for the future (48 percent). Interestingly, while the lowest concern, 15 percent of respondents are worried about having enough money to put food on the table. What Worries Me the Most Financially (Very or Fairly Worried) The cost of health care 43% 48% 49% 52% Saving for the future (retirement, education, etc.) Keeping up with the cost of living 39% 36% 40% 35% 34% 44% 48% 46% Paying your rent (non-homeowners) Paying your monthly bills Financially supporting a parent or adult sibling Adult children being financially dependent on you 14% 26% 24% 27% 26% 22% 26% 22% 19% 20% 24% 23% 19% 18% 19% 19% Paying your mortgage (homeowners) Having enough money to put food on the table 16% 15% 11% 15% 20% 14% 13% 27% Total Population Millennials Gen Xers Boomers 0% 10% 20% 30% 40% 50% 60% Aon Hewitt 13

16 Being seen as financially responsible, having a comfortable retirement, and being prepared for the unexpected drive my savings behavior. When asked what motivates them to save, employees shared their desire to be financially responsible (80 percent), to have a comfortable retirement (77 percent), and to be prepared in case of an emergency (76 percent). What Motivates Me to Save (Extremely or Very Motivating) Being financially responsible 80% Being able to do what I want when I retire 77% Being prepared for any unforeseen problem 76% Being able to buy something I want, but can t afford right now Hearing family/friends talk about their savings plans 38% 51% 52 percent of Millennials report hearing family/friends talk about their savings plans as motivating. 0% 20% 40% 60% 80% 100% 14 Financial Mindset TM Study

17 I know I need an emergency fund, but building resources for my future is also important to me. Employees saving priorities are in tune with their motivations: The top three priorities are having an emergency fund (86 percent), saving for retirement (82 percent), and accumulating wealth (67 percent). As we might expect, saving for retirement as a priority varies by age, with 88 percent of Boomers but only 71 percent of Millennials listing it as a top priority. Employees Savings Priorities (High or Moderate Priority) Having an emergency fund Retirement income Wealth accumulation/investments 71% 67% 67% 68% 66% 86% 88% 86% 85% 82% 84% 88% Vacation or travel 51% 57% 52% 44% Making a large purchase such as a car 41% 40% 32% 53% Education expenses (others) 19% 37% 48% 45% Home purchase 18% 35% 35% 53% Education expenses (your own) 20% 42% 14% 5% 0% 20% 40% 60% 80% 100% Total Population Millennials Gen Xers Boomers These priorities tend to be higher for women. These priorities tend to be higher for men. Aon Hewitt 15

18 Planning is important, but I need to do more. Nearly all employees reported doing some kind of planning, whether broad financial planning or retirement planning, and many expressed a need to do more especially when it came to managing short-term needs, life insurance, wills, and retirement-related areas. Interestingly, 57 percent of parents say they need to start or do more planning around saving for the education of others. Broad Financial Planning Enough Planning, No More Needed Some Planning, but Need to Do More No Planning, but Is an Important Need for Me Not an Important Need for Me 100% 80% 60% 40% 20% 0% 7% 19% 48% 25% Managing shortterm/current financial needs (dayto-day expenses) 26% 20% 31% 23% Home purchasing/ financing 13% 25% 39% 22% Determining life insurance/disability insurance needs 60% 12% 14% 14% Saving for my own education 14% 38% 35% 13% Creating/updating wills, trusts, or other legal activities 43% 20% 27% 11% Saving for the education of others Retirement Planning Enough Planning, No More Needed Some Planning, but Need to Do More No Planning, but Is an Important Need for Me Not an Important Need for Me 100% 5% 8% 7% 4% 80% 25% 28% 35% 34% 60% 40% 57% 51% 48% 52% 20% 0% 14% Determining how much to save 13% Determining where to invest 11% Determining retirement lifestyle (where to live, how you will be spending your time) 10% Estimating retirement income/ expenses (including health care, living expenses, debt, etc.) 16 Financial Mindset TM Study

19 What Are Employees Doing (or Not Doing)? Employees say they understand the need to save but lack full confidence when it comes to investing and planning for their future. Employers should offer tools and resources that empower employees to improve their financial wellbeing. Aon Hewitt 17

20 For the most part, I m currently saving for what s most important to me. There is a direct correlation between what employees state as their top priorities for saving and what they say they are actually saving for except when it comes to vacation/travel. When asked to prioritize their reasons for saving, employees listed having an emergency fund, saving for retirement, and wealth accumulation/investments. However, when asked what they are actually saving for today, vacation/travel crept into the top three, surpassing wealth accumulation/investments. Savings Priorities vs. What I m Actually Saving For High/Moderate Priority* Currently Saving For Having an emergency fund 70% 86% Retirement income 82% 74% Wealth accumulation/investments 53% 67% Vacation or travel 51% 78% Making a large purchase such as a car Education expenses (others) Home purchase 37% 35% 41% 55% 59% 56% Education expenses (your own) 20% 42% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% *Percentages based on employees who say the item is a high or moderate priority 18 Financial Mindset TM Study

21 My biggest challenge to saving is affording it. The number of respondents citing the ability to afford saving (37 percent) was significantly higher than for all other barriers, and women (44 percent) struggled more than men (30 percent) with affording to save. Interestingly, over one-third cite a lack of understanding about how to save as at least somewhat of a barrier. What Keeps Me From Saving Very Significant/Significant Barrier Somewhat of a Barrier Not a Significant Barrier/Not a Barrier at All I can t afford to save 37% 20% 43% I m concerned about not being able to access my savings when I need it 19% 23% 58% I don t understand where to save 16% 21% 63% I don t have any need for saving right now 15% 20% 65% I don t understand how to save or my saving options 14% 20% 66% 0% 20% 40% 60% 80% 100% Millennials are more likely to cite this as a significant barrier (26 percent). Women tend to cite this as a bigger barrier than men (44 percent versus 30 percent, respectively), as do employees with a household income of less than $65K (51 percent). Aon Hewitt 19

22 I need to plan for my retirement. Only about half of employees are estimating their retirement financial needs, determining savings requirements, or forecasting how much income they will need in retirement. Even fewer (40 percent) say they have crafted a financial plan for their actions to achieve their goals. Men and employees with a household income of at least $65K are the most likely to forecast their retirement income needs. Actions I ve Taken to Forecast My Retirement Income (Percentage Who Say Yes) Compared how much I ll need in retirement to how much I m likely to have Projected how much money I ll need to live on when I retire 54% 53% Boomers (62 percent) are more likely than other generations to compare how much they need to how much they will likely have. Created a financial action plan that details what I need to do in order to retire by my goal 40% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 20 Financial Mindset TM Study

23 I save for retirement when I can, but not always with a plan in mind. A majority of employees (68 percent) say they save regularly for retirement, although one-third do not. When it comes to saving for retirement, men (33 percent) are more likely to have a long-term plan than women (27 percent). Approach to Retirement Saving I save regularly, but I don t really have a long-term plan 38% I save regularly according to my long-term plan I don t save yet, because I can t afford to I don t save regularly, but do save from time to time, when I can afford to 9% 15% 30% Men (33 percent) are more likely to have a long-term plan than women (27 percent). I plan to start saving but haven t had time to start 5% I don t save yet, because I don t know how to get started 3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% And, when asked how much preretirement income they will need to replace when they retire, one in four respondents had no idea, with many of those being Millennials (30 percent), women (31 percent), and those employees with less than $35K in household income (45 percent). Estimated Preretirement Income Needs 30% 25% 24% 25% 25% 20% 15% 10% 5% 5% 8% 13% Millennials (30 percent), women (31 percent), and those with a household income of less than $35K were most likely to have no idea. 0% 110% or more 100% 109% 90% 99% 80% 89% Less than 80% I have no idea Aon Hewitt 21

24 I see lots of good reasons to save in my employer s retirement plan. When it comes to saving in their employer s retirement plan, automatic payroll deductions (91 percent), employer match (86 percent), and tax advantages (76 percent) are the top three reasons employees save in the plan, with ease of saving being the leading incentive. Retirement Plan Features That Influenced My Decision to Save (Strong or Somewhat of an Influence) Ease of saving through automatic payroll deductions 91% My employer matches a portion of the contributions that I make 86% Tax advantages 76% Access to good investments that are monitored by the company Lower investment expenses/fees compared to other savings plans 67% 72% Men (72 percent) were more influenced by lower investment expenses/fees than women (62 percent). The ability to take a loan if I need money 46% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Men (80 percent) and those with a household income of more than $65K (80 percent) were more likely to cite tax advantages, while women (73 percent) and those with a household income of less than $35K (57 percent) were less likely to cite it. Millennials (54 percent) were more likely to select the ability to take a loan than Boomers (37 percent). 22 Financial Mindset TM Study

25 Deciding how much to save comes down to what I think I can afford. Three out of four employees say they are contributing to their employer retirement plans. Of those, perceived affordability (48 percent) is the primary driver behind contribution levels. How Much I Contribute to My Employer s Retirement Plan (Percentage of Pay) 40% 35% 30% 25% 20% 37% 35% 15% 10% 11% 8% 9% 5% 0% 5% or less 6% 10% 11% 15% 16% 20% 21%+ Factors in Contribution Decision Contributed the most I felt I could afford 48% Went up to the company match level 29% Women (51 percent) and those with a household income of $35K $65K (54 percent) were most likely to list affordability. Men (24 percent) and those with a household income of $100K+ (27 percent) were most likely to contribute the most allowed. Contributed the most allowed by the plan Used tools or resources provided by employer Consulted a family member, friend, or co-worker Used tools or resources from a trusted website/app (not provided by employer) Consulted a financial advisor (not provided by employer) 10% 9% 12% 17% 20% Men (20 percent) were more likely to use tools or resources than women (14 percent). Millennials (22 percent) were more likely to consult a family member, friend, or co-worker than Boomers (5 percent). Aon Hewitt 23

26 Deciding how much to save comes down to what I think I can afford. (continued) Among those not contributing, the inability to afford savings (48 percent) is the primary barrier, followed by lack of awareness or knowledge about the plan (19 percent). Reasons I Do Not Contribute to My Employer s Retirement Plan Can t afford to make contributions 48% Do not know whether I can contribute or don t know enough about the plan Concerned about losing money Can get better investment returns elsewhere Too young to make contributions a priority at this time Can t access money when I need it Company contributions and Social Security will be enough/don t need to contribute further Need greater range of investment options 19% 16% 15% 13% 11% 10% 8% Men (19 percent) were more likely to say they could achieve better investment returns elsewhere than women (11 percent). 0% 10% 20% 30% 40% 50% 60% Women (55 percent) and those with a household income of less than $35K (65 percent) were most likely to say they could not afford to save. Millennials (31 percent) were more likely to say that they are too young to make contributions a priority. 24 Financial Mindset TM Study

27 I consider myself mostly cautious when it comes to investing. When asked about their investing attitudes, most employees (73 percent) regarded their investing style for retirement savings as cautious or balanced even more so among women (76 percent). Gen Xers (30 percent) and those with a household income of more than $65K (26 percent) were most likely to describe their investment style as aggressive. Retirement Savings and Investment Approach Total Men Women 21% Aggressive 27% Aggressive 16% 33% Balanced 35% Balanced 31% 40% Cautious 34% Cautious 45% 6% Unsure 4% Unsure 8% Perception vs. Reality In comparison, Aon Hewitt s universe of approximately 2.5 million participants shows actual defined contribution investment behaviors to be more aggressive than participants may believe. Using equity allocation as a bogey for the risk level of the portfolio, close to six out of 10 participants would be aggressive investors: Allocation to Equities Percentage of Participants Conservative 0% 19% 8% 20% 49% 8% 50% 74% 26% Aggressive 75%+ 58% Source: Aon Hewitt 2015 Universe Benchmarks Aon Hewitt 25

28 I don t check or change my investments very often. Only one in five employees investing in retirement savings is highly active in the plan, with men (23 percent) and Millennials (25 percent) being the most active (i.e., checking investment performance regularly, changing contributions, or altering investments on a regular basis). Level of Engagement With Retirement Investments* Low Medium High 12% 70% 18% Level of Engagement Men Women Millennials Gen Xers Boomers Low 10% 14% 12% 14% 10% High 23% 13% 25% 18% 12% * Level of engagement is calculated using frequency of checking performance of and making changes to retirement plans. High represents employees who check/make changes at least quarterly, and Low includes those who check/make changes once a year or less often. Perception vs. Reality Over half of respondents say they made changes to their retirement investments at least once during the year, yet according to other Aon Hewitt research, only 19 percent of participants rebalanced their portfolios (excluding premixed portfolios) during the year. Source: Aon Hewitt 2015 Universe Benchmarks Frequency of Checking Performance or Making Changes Checking Performance of Retirement Plans Once a week or more Once every few weeks Once a month On a quarterly basis Once a year Hardly ever 1% 3% 5% 8% 10% 10% 12% 18% 17% Making Changes to Retirement Plans 31% 42% 43% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 26 Financial Mindset TM Study

29 If I do anything, I look to fund information most to decide where to invest. Unsure of what to consider when investing, one in five respondents leaves his/her funds where they were automatically placed. For others, financial performance, economic factors, and time until need impact decisions about how and where to invest. A fund s past performance resonates the most with Gen Xers and Boomers, while Millennials are most influenced by the expectation of a fund s future performance. Most Important Factors in My Investment Decisions (Ranked 1, 2, or 3) Funds past performance Funds risk level Expectation of funds future performance Economic factors (stock market, inflation, etc.) Length of time until money is needed/my age 37% 35% 33% 30% 29% Professional financial planner Information on the retirement plan website Fellow participants/friends/family 12% 15% 15% Reputation of fund manager Benefits/human resources representative Financial investment publications or websites not provided by plan Plan publications I m unsure what factors to consider, so I leave funds where they re automatically placed 9% 9% 8% 6% 20% 0% 5% 10% 15% 20% 25% 30% 35% 40% Aon Hewitt 27

30 What Do Employees Really Want? Employees say their employer retirement plans are good, but they want more support there and in other financial areas. Employers should create an environment of ongoing and relevant (timely and targeted) communication and education. 28 Financial Mindset TM Study

31 I expect my retirement income to come from multiple places not just my company s retirement plan. Fewer than 10 percent of employees feel their retirement income will come from a single source. Instead, the majority expect their income to come from a variety of sources, including their company s retirement plan, Social Security, different employers plans, and other personal savings such as investments, IRAs, and real estate. On average, nearly half (48 percent) of retirement income is expected to come from a current or different employer s retirement plan. Boomers expect a higher percentage of their income to come from Social Security than do other generations. Gen Xers are more likely to look to their company s retirement plan for future income, while Millennials tend to allocate more to other assets and income. What Percentage of Your Retirement Income Will Come From Each of the Following Sources? (Average Allocation) Higher for Boomers (38 percent) Social Security 29% Current employer s retirement plan 36% Higher for Gen Xers (40 percent) Other assets and income 24% Different employers retirement plans 12% Higher for Millennials (41 percent) Aon Hewitt 29

32 My company s retirement plan is satisfactory and competitive, and I like the resources provided. Nearly three-quarters of employees (73 percent) are satisfied with their company s current retirement plan(s), and about 82 percent of respondents rated their company s plan(s) as at or above those offered by other companies. Satisfaction With Current Retirement Plan(s) Strongly Agree/Agree Slightly Agree Slightly Disagree Disagree/Strongly Disagree Overall, I m satisfied with my company s current retirement plan(s) 46% 27% 12% 16% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% How I Think My Current Employer s Retirement Benefits Compare to Other Companies Below/Well Below 18% Well Above/ Above 33% About the Same 49% Men (35 percent) and those earning $100K+ (39 percent) are more likely to view retirement benefits as well above/above while women (30 percent) and those earning below $35K (16 percent) are less likely. And, the majority of employees appreciate the retirement planning resources that are available through their employers. Three-quarters of employees feel their employer s plan has the resources they need to effectively prepare for retirement. My Company Offers the Resources I Need Strongly Agree/Agree Slightly Agree Slightly Disagree Disagree/Strongly Disagree My company offers the resources I need to help me prepare for retirement 44% 31% 11% 15% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Employees earning below $35K (34 percent) are less likely to be satisfied or feel the company offers resources to help prepare for retirement. 30 Financial Mindset TM Study

33 I think my employer should help across many financial needs, but especially for retirement. Employees are eager for financial planning and savings help especially Millennials. Companies can help participants plan and save for retirement and expand their offerings to provide tools and services for broader financial planning. Even though there is a prevailing sense of optimism and confidence among employees, they are ready for help with more than just saving for retirement. Extent to Which I Believe Employers Should Help With the Following (a Lot or Somewhat) Save for retirement/long-term needs 91% Establish an emergency fund 56% Save for children s education 52% Save for short-term needs 52% Create or manage a budget for personal expenses 42% 0% 20% 40% 60% 80% 100% Millennials are more likely to feel that their employer should help with financial needs beyond retirement. Aon Hewitt 31

34 I think my employer should help across many financial needs, but especially for retirement. (continued) Of the resources employees would most like to see, retirement planning information or courses (73 percent), access to investment advisors (54 percent), and investment information or courses (47 percent) ranked highest. Boomers (81 percent) especially expressed a desire for retirement planning information. A significant portion of respondents (41 percent) also indicated that debt management and budgeting are of interest. Services and Tools I Prefer From My Employer (Ranked 1, 2, or 3) Retirement planning information or courses 73% Individuals with a household income over $100K show a greater preference for access to a personal advisor (61 percent) and investment information courses (50 percent). Millennials and those with a household income < $35K want information on debt management (Millennials: 46 percent, < $35K: 51 percent) and credit counseling (Millennials: 30 percent, < $35K: 31 percent). Access to personal investment advisor 54% Investment information or courses 47% Debt management or budgeting information or courses 41% Financial information and/or advice website 40% Credit counseling 25% Financial information group session 20% 0% 10% 20% 30% 40% 50% 60% 70% 80% When Help Requires Personal Data Living in an era where data breaches have become common headlines, some employees reported reluctance about sharing their personal data. However, most employees say they are comfortable (64 percent) with providing their financial information in exchange for personalized consultation and planning. Millennials, who want the most help from their employers, are also most likely to feel comfortable sharing personal financial information with their employer (76 percent). Very Comfortable 16% Somewhat Comfortable 48% Not Comfortable at All 12% Not Very Comfortable 24% 32 Financial Mindset TM Study

35 I prefer but don t rely solely on that to reach me. Regardless of the financial topic, is the preferred mode of communication selected about twice as often as the next favorite communication method. The top three preferred methods of communication were consistent across financial topics, except when it came to selecting and managing investments, where the desire for one-on-one meetings rated higher. Even though more women report feelings of financial insecurity and higher levels of intimidation when it comes to finances, there are no meaningful differences on channel preferences by gender. By age, preferences for printed materials and in-person meetings start to emerge for Gen Xers and Boomers, while text messages and videos are more notable for Millennials. Communication Channel Preference for Financial Topics Topic Channel General Financial Information Day-to-Day Money Management and/ or Budgeting Retirement Plan/ Retirement Planning Selecting and Managing Investments 66% 66% 64% 61% Internal company website 34% 36% 36% 40% Postal mail (printed piece) 31% 29% 34% 31% In-person group meeting 27% 22% 30% 32% One-on-one meeting 26% 22% 32% 33% Text message 14% 16% 10% 10% Virtual meeting (teleconference or video conference) 12% 11% 14% 16% Videos 10% 12% 11% 13% Company-specific Facebook page or Twitter feed 5% 7% 5% 5% Posters or signs 4% 6% 4% 4% Aon Hewitt 33

36 I use a variety of resources to track and manage my money. Many employees go online or rely on their smartphones when it comes to managing their finances. This trend is even more significant among Millennials than among other demographics. Millennials use online and mobile resources more than other generations do: 53% Banking websites 41% Banking apps 34% Bank account alerts Resources I Currently Use for Managing Current Finances/Expenses Banking websites Stock or investment websites Banking apps that allow you to view account information or make transactions Bank account alerts None Stock or investment tool apps (such as E*Trade, Vanguard, or Acorn) Apps or websites that help you track spending, budgeting, bills (such as Mint, Quicken, BillGuard) 19% 17% 23% 23% 29% 29% 40% Other 10% 0% 20% 40% 60% 34 Financial Mindset TM Study

37 Who Responded Aon Hewitt 35

38 Who Responded Gender This inaugural edition of Aon Hewitt s Financial Mindset Study is based on an online survey administered in the U.S. during April 2015, by The Futures Company, a market research and trends firm. Women 49% Men 51% A representative group of 2,001 employees working in companies with at least 1,000 employees completed the comprehensive survey. Age 65+ 5% % % % % % Race/Ethnic Identity African-American 9% Asian 1% Hispanic/ Latino(a) 12% Multiracial 1% Other 6% White 71% 36 Financial Mindset TM Study

39 Region West 20% Northeast 20% South 35% Midwest 25% Household Income < $35,000 11% $100,000 or more 33% $35,000 $64,999 26% Family Status $65,000 $99,999 29% Married/civil union no child(ren) 11% Single with child(ren) 18% Married/civil union with child(ren) 46% Single no child(ren) 25% Aon Hewitt 37

40 Employment Part-time (less than 30 hours per week) 12% Full-time (30 hours or more per week) 88% Company Size (Number of U.S.-Based Employees) 1,000 1,999 10% 25,000 or more 32% 2,000 4,999 19% 15,000 24,999 7% 10,000 14,999 11% 5,000 9,999 20% Job Description Senior management Middle 4% management 16% Supervisory 20% Individual contributor 60% 38 Financial Mindset TM Study

41 Education Advanced/ postgraduate degree 16% Some or no high school 1% High school graduate 10% Some advanced/ postgraduate education 5% Some college 25% College graduate 44% Tenure 15+ years 24% < 2 years 15% 2 4 years 18% years 17% 5 9 years 26% High-Level Industry Utilities and telecommunications 7% Health care 9% Media, entertainment, and leisure 6% Manufacturing and energy 18% Financial services and insurance 13% Public sector 16% Business services and construction 15% Retail and wholesale trade 16% Aon Hewitt 39

42 40 Financial Mindset TM Study

43 Additional Insights Aon Hewitt 41

44 Meet the SAVING Well Segments Though we see clear differences between demographic groups like age, gender, and income, it is often attitudes toward saving and finances that can influence employee behaviors most significantly. Why do some young employees save a lot and others save nothing at all? Why might those earning relatively higher incomes, where affordability would not be as challenging, still not save enough to produce an appropriate retirement outcome? Using our prior research, we identified six attitudinal segments, each with distinct characteristics that along with the data from this study provide additional insight beyond traditional demographics into the enablers and barriers to the outcomes we desire. By understanding the prevalence of these attitudinal segments in the overall population and in your organization specifically, a more targeted and effective strategy can be built. S A V I N G Show Me the Way All I Can Do Very Hopeful I ll Get There Nearing the Finish Getting Ready 42 Financial Mindset TM Study

45 SAVING Well Attitudinal Segments Show Me the Way Below-average-income employees who value retirement guidance All I Can Do Below-average-income employees who do not see a way to save Very Hopeful Average-income older employees with good savings habits who value advice I ll Get There Young and well-educated employees who are financially unsophisticated Nearing the Finish Knowledgeable, aboveaverage-income employees looking to retire early Getting Ready Above-average-income employees with good savings habits who are looking to continue working past traditional retirement age S A V I N G I believe in living life to the fullest and that can cost a lot of money! I know I could be doing better to manage my debt, and it s really affecting my life. I m worried I might not be able to retire when I want to. I want to be more confident about my future. And I know I may be a few steps behind others when it comes to owning a home or making informed investment decisions. I m just not sure what I can afford to save for retirement at this time, but I m open to ideas for finding that balance. I ve got so much to deal with right now, I can t even begin to think about the future. I feel like I spend all of my time working just so I can pay my monthly bills. I need to cover my day-today expenses. It makes me feel anxious and out of control. I can t see how to save for the future when I can t even pay for the things I need right now. I ve settled into my life and enjoy a comfortable balance between work and home. Financially speaking, I m comfortable. I ve been in retirement-planning mode for some time, and I understand staying the course will lead me to the financial future I desire. I may never be rich, but I don t expect to worry about money. I m young, proud of my education. Starting a family is on my radar, so securing our financial future is important to me. I might be paying off some student loans or buying my first home, but I ll do whatever it takes to protect my finances now and in the future. I know I need to do more to save for my retirement, but some months I need the extra cash in hand to pay for my current expenses. I fully anticipate retiring by age 64. I make sure I have control over my life. This means having little debt, earning a good living at a job in which I excel, and deciding what I want to do when I want to do it that includes retirement, which I expect to be able to do at an early age. I m financially stable and wise with my investments. Saving for the future and planning for retirement are important to me. I place a high importance on formal education, and I expect the same of my children. I feel in control of my future and enjoy the fruits of my labor. I m financially stable and secure, and wise with money and my investments. My years of financial planning have afforded me the opportunity to live comfortably. Aon Hewitt 43

46 Meet the SAVING Well Segments (continued) Segments in the U.S. Population Nearing the Finish 5% Getting Ready 18% N G Show Me the Way 16% S A All I Can Do 17% I ll Get There 24% I V Very Hopeful 20% Not surprisingly, the segments vary by age and income. S A V I N G 77% 68% 53% 43% 53% 50% 35% 35% 35% 25% 22% 22% 2% 21% 27% 5% 12% 15% Millennials Xers Boomers Millennials Xers Boomers Millennials Xers Boomers Millennials Xers Boomers Millennials Xers Boomers Millennials Xers Boomers 44 Financial Mindset TM Study

47 Meet the SAVING Well Segments (continued) S A V I N G Household Income Show Me the Way All I Can Do Very Hopeful I ll Get There Nearing the Finish Getting Ready < $35,000 9% 13% 7% 7% 0% 0% $35,000 $64,999 32% 34% 27% 24% 12% 3% $65,000 $99,999 35% 26% 36% 41% 17% 16% $100,000 or more 24% 28% 30% 28% 71% 81% Average HH income $77,000 $77,000 $84,000 $85,000 $142,000 $153,000 While age and income differ across particular attitudinal segments, so do opinions about control, financial acumen, debt, and engagement with their employer retirement plan. S A V I N G Strongly Agree/Agree (Unless Noted) Show Me the Way All I Can Do Very Hopeful I ll Get There Nearing the Finish Getting Ready I feel I m in control of my financial future I m often intimidated by financial matters My level of debt is ruining the quality of my life High engagement with retirement plan* 74% 64% 73% 80% 94% 91% 46% 51% 37% 40% 34% 26% 42% 33% 24% 24% 28% 19% 29% 9% 16% 29% 39% 35% Significantly lower than other segments Significantly higher than other segments * Level of engagement is calculated using frequency of checking performance of and making changes to retirement plan. High represents employees who check/make changes at least quarterly. Learn More In addition to the general characteristics of each of the segments, there are variations in employees motivations, barriers, and priorities for saving, and in their preferences for education and communication. Aon Hewitt 45

48 Aon Hewitt s Mindset Research The Financial Mindset Study is the newest addition to Aon Hewitt s Mindset studies, which also include the Consumer Health Mindset Study and Workforce Mindset Study. Our suite of research provides a comprehensive view across retirement, health, and talent to help our clients understand the total employment experience. Consumer Health Mindset TM Study Since 2010, Aon Hewitt and the National Business Group on Health have collected feedback from the American health care consumer (employees and dependents) to understand their perspectives, attitudes, and behaviors toward health and health care as they interact with their employersponsored health plans and wellness programs. Workforce Mindset TM Study This study explores employees perceptions and attitudes about their work experience including values and culture, environment, engagement, total rewards, and communication. The findings reveal what differentiates an employer, what rewards are most valuable, and what is the best way to reach employees to deliver a compelling employment experience. For additional information, please visit aonhewitt.com. 46 Financial Mindset TM Study

49 Contacts Heather Tredup Ray Baumruk Nicole Durham Christin Devcich Aon Hewitt gratefully acknowledges the contributions of Rob Austin to the creation and analysis of this study. We also acknowledge the support of others who made this report possible, including Beth Boden, Alison Borland, Jim Hoff, and Barb Hogg, as well as the team from The Futures Company. About Aon Hewitt Aon Hewitt empowers organizations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organizational and personal performance and growth, navigate retirement risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness. Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide. For more information, please visit aonhewitt.com.

50 About Aon Aon plc (NYSE:AON) is a leading global provider of risk management, insurance brokerage and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 69,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative risk and people solutions. For further information on our capabilities and to learn how we empower results for clients, please visit: Aon plc All rights reserved. The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Risk. Reinsurance. Human Resources.