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Where Financial Plans Fall Short

Are workers who have a financial plan more likely to save, or are workers who save more likely to have a financial plan?

A new study found that, regardless of their incomes, people who have a financial plan reported saving a median of 10% of their salaries toward retirement, while those without a plan saved a median of 6% of their salaries toward retirement.

However, according to the “Beyond Retirement Advice” study from Financial Engines, only one-third of American workers (37%) with annual incomes between $35,000 and $100,000 have a comprehensive financial plan, compared to nearly half (48%) of workers who earn $100,000 or more per year.

Perhaps not surprisingly, 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% middle income versus 61% upper income);

  • purchase life or disability insurance (67% middle income versus 83% upper income); or

  • do estate planning (57% middle income versus 77% upper income).

That said, neither middle- or upper-income plans address important topics such as the adequacy of a savings rate to achieve retirement goals or strategies to maximize Social Security benefits, according to the report.

The Financial Engines study found that more than half (57%) of all plan participants and nearly three quarters (72%) of middle-class planners said that they were very or extremely interested in accessing financial planning help via the workplace. Moreover, more than half (53%) 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 more likely than the average worker (52% versus 44%) to say that having a financial planner vetted by their employer is a major advantage.