The financial benefits many Americans saw during the pandemic, like greater savings and fewer expenses, have been replaced by a level of financial stress not seen since 2019, according to a study by Boston-based John Hancock Retirement.
The ninth annual Stress, Finances and Wellbeing Survey found that the impact of record-high inflation and rising interest rates last year forced people to make difficult decisions about how to accommodate those extra costs in their spending, often at the expense of their long-term goals.
As a result, 68% of workers said that at the end of 2022 they were concerned about the stress their financial situation was adding to their lives, compared with 58% in 2021, and now 38% of employees think they’ll have to retire later than initially planned, compared with 24% last year, the survey found.
“That’s one of the biggest take-aways in the survey this year. Though the pandemic, we’d actually seen financial stress start to decline. People were doing a better job of saving, of planning,” said Lynda Abend, head of strategy and transformation, at John Hancock Retirement. “This year, the most concerning piece of information is we’ve started to see that financial stress rise again.”
This is the second survey in the last two weeks to hit the same conclusion. The first, a survey by Telus Health, found that the state of mental health for U.S. workers dropped by more than 2% in January, and resilience those workers felt to financial risk declined by almost 4%.
And as with the Telus Health survey, the John Hancock showed a strong connection between financial wellbeing and working with a financial advisor, with only 17% of employees who worked with a financial advisor saying they felt undue concern.
According to the John Hancock survey, 90% of American workers in 2022 recorded a sudden increase in the cost of groceries, household basics, gas and various monthly bills, and 76% started being more deliberate about how they spend, by comparing costs, postponing large purchases or only buying essentials.
They also reported that their economic worries were taking a toll on their mental health, but that was a burden not equally borne. Some 81% of Gen Zers and millennials reported they were struggling mentally with the stress, as were 77% of households earning less than $50,000 and 77% of women.
The general feeling among respondents, the survey found, was that nothing in their financial situation was going to improve anytime soon. When asked about the future, 65% said they didn’t expect prices to lower, 58% said they didn’t expect the worst of the economic downturn to be over and 34% said they didn’t expect their financial situation to improve.
“I predict that financial stress will continue to rise as we come into an election year and the two political parties start to battle,” Abend said. “All that noise will make people feel less secure and more stressed than they do today.”
The three primary areas of concern for workers are retirement savings, credit card debt and emergency savings. In 2021, 43% of workers said they had fallen behind in saving for retirement, but that rose to 56% of workers in 2022.
Paralleling the Telus Health survey, the John Hancock survey found that 19% of workers had recently pulled money out of savings to pay for daily expenses (28% for Telus, which included employed and unemployed workers in its respondent pool), and the progress on savings made during the pandemic had reversed. In 2019, 36% of workers saw their financial situation as fair or poor, and that declined to 34% and 31% in 2020 and 2021, respectively, the survey found. But that figure jumped in 2022 to 42% of workers.
And finally, as with the Telus survey, the American worker would like more education and support through their employer when it comes to retirement planning, John Hancock found. The areas of greatest interest were learning about sources of retirement income, projections of estimated income and expenses, Social Security strategies, management of retirement investments and savings, and a consultation with a financial professional.
The effect this information had on financial wellbeing was strong: 86% of those who worked with a financial professional, had a plan for retirement and made use of their employer’s financial wellness programs said their financial situation was good to excellent, compared with only 45% of workers who didn’t have that support.
And respondents who worked with a financial professional were three times more likely to say their retirement savings was ahead of schedule.
“We see emergency savings as one of the key areas of opportunity for financial professionals who have access to employees, ensuring that they have the right level of savings put aside for an emergency,” Abend said. “It answers the question, ‘Do I have enough emergency savings to last three to six months if something should happen?’”
The survey was conducted in early December online and involved 3,825 John Hancock retirement plan participants. Questions hit on individual stress levels, their causes and effects, and strategies for relief.