Stressed by Finances, Workers Are Changing Contribution Strategies

Persistent inflation has driven up the costs of housing, groceries and gas, forcing many workers to prioritize immediate liquidity over long-term investments. As an action step, a majority of U.S. workers have altered their workforce benefit contribution strategies, a new research report revealed.

Perhaps most visible, according to Morgan Stanley at Work’s State of the Workplace Study, is that 61% of the 1,000 workers surveyed by the financial services firm have reduced their contributions to financial benefits such as 401(k) or 403(b) plans and/or Roth individual retirement accounts (IRAs).

This trend is more prominent among younger workers, noted Craig Rubino, the head of corporate relationship management and engagement at Morgan Stanley at Work: 70% of Generation Z and Millennials have made such moves, compared to 53% of Gen X and 43% of Boomers.

With open enrollment season on the horizon, that could play out in reduced participation in or subdued contributions to:

• 401(k)/403(b) plans and IRAs;
• Health savings accounts;
• Flexible spending accounts;
• Disability and supplemental life insurance;
• Additional voluntary benefits (e.g., pet insurance, legal advisement services, identity theft protection).

It also could mean more conservative choices for medical, dental and vision insurance.

“As employees navigate a challenging, uneven economic environment, workplace benefits remain a critical lever of financial support,” Rubino said. “Retirement can feel far away, especially for younger workers, but pulling back on savings vehicles like a 401(k) can hinder retirement readiness over time and lead to long-term consequences.”

Access a bonus Workspan Daily Plus+ article on this subject:

• Steps to Help Employees Before They Cut 401(k) and Other Contributions
• How to Drive Financial Benefit Usage When Employees’ Budgets Are Tight

Workers and HR Pros Are Worried

The Morgan Stanley data aligns with other reports citing a pullback in benefit contributions. Payroll and benefits firm Dayforce found workers cut their retirement savings contribution rate in 2025 to 8.9%, down from 9.2% a year earlier, and 1 in 4 workers reduced their annual savings in their 401(k) or other types of employer-sponsored accounts. The dip was sharpest among workers with annual income between $50,000 and $150,000.

Other key findings from the Dayforce report:

• 80% of HR managers worry employees’ financial issues negatively affect productivity, and employees agree — 56% of U.S. workers say financial stress negatively affects their work.
• 53% of HR managers believe financial stress-reducing benefits matter most to job satisfaction, exceeding mental or emotional support (26%) and physical wellness benefits (19%). Again, workers agree — and 79% of employees believe their employer needs to do a better job helping them understand how to maximize the financial benefits offered.
• 73% of workers feel they need to accelerate their financial planning efforts and 84% encountered financial issues in the past year, including budgeting (39%), financial goal setting (35%) and retirement planning (34%).
• 85% of employees say they would feel more invested in their company if it offered financial benefits tailored to their needs, and 91% would consider switching jobs for benefits that help them reach their goals.

Pullbacks on Both Sides

The real compounded concern is that the pullback is happening on both sides of the equation, as employers also are navigating rising costs, said Kevin Crain, the executive director of the Institutional Retirement Income Council (IRIC), a nonprofit organization that promotes financial education.

“Employees are cutting back at the same moment some employers are quietly reducing or pausing the matching contributions. Also, hardship withdrawals and new loan initiation have increased in the past two years,” he stated.

But for a mid-career worker, even a 2- or 3-percentage-point cut in retirement contributions, sustained over a few years, can cost $100,000 or more in projected post-work wealth, Crain said.

“The damage isn’t visible today, but it compounds quietly, and the workers cutting back the most are the ones with the most to lose,” he said.

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Benefits
• Total Rewards
• Well-Being