Why Financial Wellness Benefits Are More Important than Ever

How much money do Americans think they need to retire comfortably?

According to Northwestern Mutual’s 2025 Planning & Progress Study, the “magic number” is $1.26 million.

But here’s the problem: Even if employees have a number in mind, many of them aren’t on track. Among those with retirement savings in the Northwestern study, 25% told the financial and insurance company what they have put aside is equal to just one year or less of their current annual income.

Access bonus Workspan Daily Plus+ articles on this subject:

Inflation is eroding workers’ purchasing power and making it more difficult to save both for short-term goals and retirement, said Rick Reed, the defined contribution practice director at Segal, an HR and benefits consulting firm. He also cited spiked costs for housing, healthcare, and general goods and services, in addition to rising interest rates.

“Younger workers and retirees are two of the most impacted generations,” Reed said. “The younger generation — because of the high cost of everything — their salaries are buying less than before. And for retirees on a fixed income, the same high costs and reduced purchasing power is putting a lot of strain on their fixed budgets.”

Kerry Sette, the head of consumer insights and research at investment company Voya Financial, added market volatility and political uncertainty, including around tariffs, are also affecting how U.S. workers are anticipating and saving for retirement.

“These concerns are not just abstract,” she said. “They’re shaping real behaviors, with some employees delaying savings decisions until after major events like the recent 2024 elections.”

The Effects of Delaying Retirement

As a result of these events, some employees are staying in the workforce longer than planned or returning to work if their retirement savings fall short. The experts interviewed for this article shared that can lead to:

An average employer cost of $51,000 per employee experiencing delayed retirement.
Shifts in workforce planning and succession strategies.
A bottleneck effect for younger employees whose career progression might be postponed, which may be partially contributing to the rise in employees seeking outside gigs or passive income streams and could lead to the loss of younger talent in an organization.
Reduced productivity, a lack of engagement and increased stress among older workers, who feel financially trapped or had to push back their retirement.
Increased healthcare costs for employers, including higher premiums for older employees.

A Generational Spectrum

The financial outlook for today’s workforce often varies significantly depending on the generation.

For example, Generation Z and millennials are juggling high student loan payments with rising housing costs and mortgage rates, said Jim Kais, the head of group retirement at Equitable, a financial services company. Meanwhile, Gen X workers are often simultaneously supporting both their children and their aging parents, leaving limited capacity to care for — and save for — themselves, Kais said, adding that Baby Boomers are thinking about how to stretch every dollar to make it last longer.

Recent entrants into the workforce may be more interested in investment advice and digital tools, Sette said, while workers closer to retirement age are likely to prioritize catch-up contributions, guaranteed income and financial education related to transitioning to retirement.

Additionally, Kais noted the evolving ways each generation views retirement, which can influence their savings strategies and needs, as well as their personal take on the “magic number.”

“Younger workers see retirement more as a moving target rather than a finish line,” Kais said. “They’re redefining it as ‘financial independence’ and not just an age where they’re going to exit the workforce. They value multiple income streams, whether that’s passive income or not, and flexibility over just thinking about retiring with a particular number in mind. Older generations are more focused on savings goals and that magic number. They’re looking for the bigger lump sum more than the younger generations.”

How Employers Can Change the Equation

Employees may have the opportunity to contribute to their retirement savings at higher rates starting next year, as contribution limits are expected to increase by $1,000 to $24,500 for most defined contribution retirement plans, according to consulting firm Milliman.

Employers and total rewards professionals also can help their workers boost their contributions in several ways.

“In today’s environment, [saving for retirement] may be more difficult for many due to the financial stress they may be under,” Reed said. “I can’t stress enough the importance of educating workers on basic financial wellness as well as saving for retirement. They are interconnected.”

The experts in this article offered these tips:

Combine retirement plan auto-enrollment and auto-escalation (now required for many plans) with employer matches to increase employee participation and contribution amounts.
Help reduce the likelihood of early withdrawals from retirement savings by offering emergency savings support (Equitable research found 80% of Americans, regardless of income, are worried about affording everyday living costs).
Match workers’ student loan payments with employer retirement plan contributions.
Offer multi-channel communications and reminders about retirement savings throughout the year, utilizing nudges or reminder texts.
Ensure communications campaigns are targeted and personal, such as a digital calculator for younger workers illustrating how much they can boost contributions by reducing takeout and food delivery or shopping for a new mobile plan; a reminder for parents to save earlier in 529 plans to better balance their own retirement savings; or a suggestion to “pay yourself first” with increased retirement contributions when an employee receives a raise.
Provide comprehensive financial education to help workers comprehend the impact of starting to save earlier and to deliver age- and life-stage-specific investment strategies as well as budgeting guidance — whether through workshops, on-demand webinars, access to financial planners or digital tools like retirement projection visualizers.

“By helping employees build both short- and long-term financial resilience, employers can foster a healthier, more future-ready workforce,” Sette 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: