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Middle-Income Americans’ Financial Plans Lagging, Financial Engines Study Finds
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Average Americans Increasingly Look to Their Employers for Professional Financial Help

SUNNYVALE, Calif.--(BUSINESS WIRE)--Dec. 6, 2016-- Despite needing help planning for retirement and other financial obligations, middle-income workers find themselves at a disadvantage when it comes to getting high-quality help from the financial services industry, according to a new study by Financial Engines (NASDAQ:FNGN), America’s largest independent investment advisor.1 Only one-third of American workers (37 percent) with annual incomes between $35,000 and $100,000 have a comprehensive financial plan, according to the study, compared to nearly half (48 percent) of workers who earn $100,000 or more per year.

Wealthier American workers also tend to have financial plans that are more complete than their middle-income counterparts. For example, plans for middle-income workers are significantly less likely to address saving for a child’s college education (41 percent middle income versus 61 percent upper income), purchasing life or disability insurance (67 percent middle income versus 83 percent upper income) or estate planning (57 percent middle income versus 77 percent upper income). Both middle- and upper-income plans also tend not to address important topics such as the adequacy of a savings rate to achieve retirement goals or strategies to maximize Social Security benefits.

“No matter how much you may earn, everyone can benefit from having a full financial plan, and our study shows that not enough people have them,” explained Wei-Yin Hu, vice president of financial research at Financial Engines. “Like most other things in life, you need a plan to achieve your financial goals -- be it retiring by a certain age or paying for your children’s college education. Without a plan, your chances of successfully reaching your goals go down significantly.”

People with a Financial Plan Also Tended to Save More

The study also explored differences between people who have financial plans and those who don’t. Regardless of their incomes, people who have a financial plan reported saving a median of 10 percent of their salaries toward retirement. People without a plan saved a median of 6 percent of their salaries toward retirement. That extra saving can make a big difference. For example, a person starting with retirement savings of $50,000 who earns an annual salary of $100,000 and saved 6% toward retirement could have as much as $890,000 after 25 years; however, if they instead saved 10% of their salary, they could have as much as $1.13 million after 25 years, or $240,000 (26%) more. 2

Looking to Employers for Financial Planning Help

Without access to professional financial help, Americans are increasingly looking for their employers to offer financial planning services that can help with budgeting, college savings and insurance. According to Aon Hewitt’s 2016 Hot Topics in Retirement and Financial Well-Being report, 89 percent of employers are likely to add or expand the financial well-being tools and services offered to employees this year.

The Financial Engines study highlights the strong interest workers have in accessing financial planning help through their employers. Over half (57 percent) of all plan participants and nearly three quarters (72 percent) of middle-class planners said that they were very or extremely interested in accessing financial planning help via the workplace.

Overall, more than half (53 percent) of those interested in financial planning services said having their employer select an advisory service that operates as a fiduciary, or acts in the employee’s best interest, was a major advantage. Middle-income workers who already have a financial plan were also more likely than the average worker (52 percent versus 44 percent) to say having a financial planner vetted by their employer is a major advantage.

“Many people don’t know where to start when it comes to finding a financial advisor they can trust and end up without a plan or working with someone recommended by a friend or neighbor,” said Hu. “Employers are in the ideal position to make high-quality financial planning help available to their employees, regardless of income, and their employees feel reassured that the financial professional selected by their employer is someone they can trust to look out for their best interests.”

Copies of the Financial Engines study, “Beyond Retirement Advice,” can be found at https://financialengines.com/workplace/resources. An accompanying quiz on financial planning can be found at https://financialengines.com/financial-planning-quiz#.

Methodology

Financial Engines commissioned an online survey of full-time employees between the ages of 25 and 65 whose employers offer them a defined-contribution retirement plan, such as a 401(k), 403(b) or 457 plan, and who participate in their employer plan by making salary contributions into their retirement accounts. This survey was fielded between May 23 and June 2, 2016, and gathered information from 1,760 retirement plan participants. The survey included a mix of respondents who reported having a formal financial plan for their households and those that do not, and included a strong sample of middle-income workers.

All screened respondents were weighted by age, gender and income to reflect the national population of retirement plan participants between ages 25 and 65, according to the Current Population Survey, a product of the United States Census Bureau. This survey was conducted for Financial Engines by Greenwald & Associates, who used Research Now’s online panel for the sample.

About Financial Engines

Financial Engines is America’s largest independent investment advisor. We help people achieve greater financial clarity by providing comprehensive financial planning and professional investment management and advice. Headquartered in Sunnyvale, CA, Financial Engines was co-founded in 1996 by Nobel Prize-winning economist William F. Sharpe. We currently offer financial help to more than 9 million people across over 700 companies (including 147 of the Fortune 500). Our unique approach, combined with powerful online services, dedicated advisors and personal attention, promotes greater financial wellness and helps more Americans to meet their financial goals.

For more information, please visit www.financialengines.com.

All advisory services provided by Financial Engines Advisors L.L.C. Financial Engines does not guarantee future results.

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding the use of professional investment and financial planning help, which involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are outlined in our SEC filings. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this press release. Unless required by law, Financial Engines undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to report the occurrence of unanticipated events.

1 For independence methodology and ranking, see InvestmentNews Center (http://data.investmentnews.com/ria/).
2 Assuming salary grows by 5% after adjusting for inflation (assumed to be 3.5%) and around 80% of the portfolio is invested in equities.

Source: Financial Engines

Financial Engines
Mike Jurs, 408-498-6590
mjurs@financialengines.com
or
Allison+Partners
Alexandra Gardell Kreuter, 646-428-0618
financialengines@allisonpr.com