Ameriprise: Out-of-Pocket Costs for Benefits Rise

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Minneapolis — Aug. 21
Ameriprise Financial has released the findings of its most recent research, “2007 Ameriprise Workplace Financial Planning Benefit Decisions,” recording mounting stress and worrying trends in employee benefit decisions leading into fall’s open-enrollment season.

The study found sources of financial stress have increased considerably for U.S. workers since 2005.

Recording increased stress in every category measured, the study found that the highest stress factors continue to be saving for retirement and paying for health care in retirement.

“The findings indicate that while most people recognize their future retirement needs, they are unable to find and apply strategies to meet those challenges to alleviate their financial stress level and increase their confidence,” said Rusty Field, Ameriprise workplace financial planning vice president. “This can lead some to cut back on their retirement saving, impacting their future retirement security.”

Workers continue to make perilous trade-offs with their benefit dollars. Decreasing overall saving and investing continues to be the second-most popular response mechanism for increased out-of-pocket benefit expenses (46 percent), consistent with prior findings and higher than all other options in 2007, except reducing discretionary spending (61 percent).

“Near-term health care coverage continues to be a non-negotiable benefit for many when pitted against long-term saving for retirement,” Field said.

The study found benefit cost increases tied to health care are having both a short-term and long-term impact on workers’ perceptions of their financial health.

More than 40 percent report an impact on their financial health and stress levels related to increases in their health care insurance costs, and 44 percent feel increasing benefit costs will affect their ability to fund retirement and other financial goals, with more than one in four very concerned.

“As employer-paid benefits such as pensions and retiree health care go by the wayside, employees increasingly confront a confusing nexus of financial decisions related to retirement plans, health insurance and other benefits on an annual basis,” Field said. “Many are increasingly recognizing how financial planning can be of assistance in making effective and balanced choices.”

  • Nearly nine in 10 (89 percent) respondents think a financial plan that directly addressed their workplace benefit costs and contingent financial decisions would be helpful.
  • Better than two of three employees (70 percent) would be moderately or very interested in one-on-one financial planning if offered through their employer.
  • More than four of five employees (81 percent) would take advantage of a financial planning option if their employer paid for a portion of it as part of the employee benefits package.

An employer-sponsored financial planning benefit option also is thought to have positive effects on workplace morale-related issues and would increase confidence in decision making regarding benefits.

  • Employees overwhelmingly think a financial planning benefit would make them feel their employer recognizes and values their effort in the workplace (87 percent).
  • A similarly high percentage of workers indicate it is moderately or very important that they feel valued and recognized by their employer through the benefits offered in the workplace (83 percent).

According to the study, fewer than one in five workers have a written, professionally prepared and paid-for financial plan. Those who lack a financial plan are more likely to cut back on their saving and investments in company-sponsored plans when confronted with increases in out-of-pocket benefit expenses.

Of those facing one or more benefit cost increases, 54 percent of those without a financial plan would reduce their retirement savings level, compared with 46 percent of those with a financial plan.

The study also found financial planning helps employees get an earlier start with saving and investing in their company-sponsored retirement plans and that they are more likely to contribute substantially throughout their life cycle.

The percentage of employees contributing 6 percent or more to their 401(k) retirement plan increased in all age groups, but it was most dramatic for those younger than 35, which increased from 35 percent to 46 percent.

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