Financial Wellness

Wellness Works:

Achieving Financial Goals

Executive Summary

We know that not all employers are going to be immediately ready to embrace a formal financial wellness program. In many cases, it may fall to you to introduce financial wellness concepts in an employee education setting. To that end, we offer you the following financial wellness communications that you can share with employees.

  • Presentation: Achieving Financial Goals. This presentation can be used with those employees who are striving to reach a state of personal financial security. Help them define realistic goals to get them started on the path to longer-term financial wellness.
  • Presentation: Retirement Ready. Use this presentation to help those in pre-retirement stages to grasp some basic concepts about health care costs, replacement income, and how savings will be used to fund retirement.
  • Hard Card: Trade-Off Considerations. Help employees understand how to manage competing priorities and financial constraints with this printable handout.

The Participant Trade-Offs hard card is represented below.

Trade-Off Considerations

For investors, retirement savings is a top priority. Here are some T. Rowe Price rules of thumb for how much a typical investor should be saving for retirement and suggested factors to think about when managing competing priorities and financial constraints, in order to maintain lifestyle in retirement.

Retirement Savings—How Much?

Investors who are: Typically should have:
30 half your salary saved today
35
1x your salary saved today
40 2x your salary saved today
45
4x your salary saved today
50 6x your salary saved today
55 8x your salary saved today
60 10x your salary saved today

All investments involve risk, including possible loss of principal.
Assumptions: Individuals have saved (from age 25 to a retirement age of 65) 15% of their annual salary (increased by 3% each year) in a tax-deferred retirement account with a pre-retirement portfolio consisting of 60% stocks/30% bonds/10% short-term bonds, changing to 40% stocks/40% bonds/20% short-term bonds during retirement.  Gross retirement income through age 95 is estimated to equal 75% of pre-retirement salary, consists of annual retirement account withdrawals of 4% plus estimated Social Security benefits (both beginning at age 65), and is increased by 3% annually for inflation. The savings benchmark analysis is based on results from the T. Rowe Price Retirement Income Calculator, which considers 1,000 market simulations and an 80% simulation success rate, using hypothetical age 65 salaries of $70,000, $100,000 and $110,000. That tool’s methodology and assumptions are explained in detail at troweprice.com/ric. Users should consider their own circumstances.  Results may not apply to earnings that vary substantially from modeled salaries.

Emergency Reserves vs. Debt Management

When choosing between emergency reserves or paying off debt, the priority should be to establish the emergency reserve first, then tackle debt. The emergency reserve can allow an investor to get through a large unexpected expense or loss of an income source without having to raid retirement savings or overuse credit cards.

Emergency Reserves

Save the minimum for retirement and build your emergency reserves. An emergency reserve is the second most important thing to fund after retirement.
 

Debt Management

Continue saving the minimum for retirement and pay off high interest debt over the next 1-3 years. Then, consider increasing retirement savings back towards 15%.

College vs. Retirement

Investors who have reached the retirement savings benchmark based on age and current salary are in a better position to reduce their retirement contributions and fund a college account.

Tools to Help Your Clients

Presentation

Achieving Financial Goals

Presentation

Retirement Ready Presentation

Retirement Ready
 

Hard Card

Trade-Off Considerations Cover

Trade-Off Considerations

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