Student debt is a significant obstacle to retirement savings. 93% of employees with student loans say that their student debt has affected their ability to save for retirement. The resumption of student loan payments in October 2023, after a three-year pandemic pause, has likely exacerbated the financial pressure for many.

The survey results further highlight a strong demand for employer solutions to this challenge. A large majority (89%) of respondents with student loans believe that having a student loan repayment benefit in the workplace is at least somewhat important. This sentiment is further echoed by the fact that 74% of those with student loans agree that they would be more likely to continue working for an employer that offered student loan-related benefits.

These findings indicate that student loans significantly hinder individuals' ability to save for retirement, and there is a strong call for employer support. By addressing this pain point, employers can strengthen employee retention and demonstrate a commitment to their employees’ holistic financial well-being.

The Rise of 529 Education Savings Accounts

Employers and financial advisors can also capitalize on the rising demand for education savings by providing employees and clients with information about 529 Education Savings Accounts. These accounts are tax-advantaged savings plans sponsored by states, state agencies, or educational institutions and are designed to encourage saving for future education costs. Only 42% of savers are at least somewhat aware of the tax benefits of 529 Education Savings Accounts, and only 5% of those we surveyed with a 401(k) on the Vestwell platform currently have one.

By partnering with their state’s 529 Program to offer education savings as a workplace benefit, employers can help their employees prepare for education-related expenses. Among employees currently saving for educational expenses, 73% placed some level of importance on having a 529 Education Savings Account in their workplace benefits package. For employers looking to differentiate themselves, providing a benefit that enhances their employees’ overall financial stability can be an effective strategy.

Our survey has revealed a trend among savers: a growing preference for customized financial guidance via financial advisors, managed accounts, and digital tools. This preference reshapes workplace benefits as savers seek more tailored approaches to manage their finances amid economic challenges.

A notable 41% of savers surveyed by Vestwell do not currently work with a financial advisor but plan to in the future. Among those who plan to work with an advisor, 41% intend to find one through referrals from friends or family, 21% through internet research, and 19% through their employer.

There is also a burgeoning interest in digital tools for personal finance management. 65% of respondents think an online platform with real-time balance checking would be helpful when managing their finances, and 94% say that a tool that offers digital personalized investment suggestions would be valuable. Accordingly, there was a 171% year-over-year increase in contributions going into managed accounts on Vestwell’s platform between October 2022 and October 2023.

While workplace retirement plans are becoming an expectation for employees, the results of our survey also indicated increasing demand for other workplace financial benefits, such as solutions for emergency and health savings.

Employers Can Play a Key Role in Bolstering Employees’ Emergency Savings

When it comes to emergency savings, the results of our survey reveal a significant shortfall: 38% of respondents have less than $1,000 in emergency savings. 29% report having no emergency savings at all. Even among those who have set aside some funds, 65% acknowledge that their savings would not be sufficient to cover six months of expenses, the commonly recommended benchmark for financial security.

The SECURE Act 2.0 has created an opportunity for employers to help fill in that gap for their employees. The emergency savings provision of the Act allows for the creation of “sidecar” emergency savings accounts (ESAs) linked to employees’ retirement accounts. This legislation offers a seamless way for employees to manage both their immediate and long-term financial needs. It also creates an opportunity for advisors to expand their offering for their employer clients and help them navigate this new legislation.

Our survey results indicate strong employee demand for employer-sponsored ESAs: 69% of respondents expressed willingness to participate in such a program, even if contributions are automatically deducted from their paychecks. Furthermore, half (50%) of savers surveyed agree that the availability of an ESA would increase their likelihood of remaining with their current employer. By offering ESAs, employers can provide a comprehensive financial wellness solution that meets immediate needs while fostering long-term financial security.

Employees Are Pursuing Greater Access to Health Savings Accounts

The desire for Health Savings Accounts (HSAs) is strong—87% of employees placed some level of importance on having access to an HSA in the workplace. It is also a powerful retention tool: 54% of respondents would be more inclined to continue working for an employer that provides access to an HSA.

HSAs are tax-advantaged savings accounts that allow savers to contribute money on a pre-tax basis to pay for qualified medical expenses. Despite the clear interest in these accounts, only 27% of savers reported having an HSA. Only those enrolled in a high-deductible health plan (HDHP) who have no other health coverage may open an HSA.

While these accounts offer substantial benefits for managing health-related expenses, their limited availability results in low usage among our survey respondents. However, the strong interest in HSAs among savers indicates a potential area of focus for employers. By incorporating HSAs into their workplace benefits package, employers can address a key area of employee need, thereby enhancing their benefits offering.

Advisors also play a crucial role in this process. In a market where HSAs are relatively underutilized, advisors can distinguish their services by helping their employer clients understand the benefits of HSAs and how to effectively integrate them into their benefits strategy. By highlighting a product that many overlook, advisors can differentiate themselves and help promote a more comprehensive approach to employee financial wellness.