The alarming trend of financial stress affecting U.S. employees is impacting their confidence, forcing them to make tough choices, and ultimately threatening their retirement savings. According to Morgan Stanley at Work, more than 39% of employees have reduced their 401(k) contributions due to concerns about inflation and recession, as well as rising prices and financial uncertainty. Signs of Financial Stress
The survey found that 67% of respondents said they are reducing their contributions across all savings accounts, indicating a growing sense of financial insecurity. The survey also revealed that:
- 28% of employees are reducing contributions to their long-term savings
- 26% are reducing contributions toward paying off debts and loans
- 25% are reducing their emergency savings and health savings accounts
This trend is not limited to employees; HR leaders are also expressing concerns about retaining employees amid the economic strain. In fact, 81% of human resource leaders surveyed by Morgan Stanley said they worry employees will seek other job opportunities if their company cannot offer benefits to help better manage employees’ financial stress. Key Factors Contributing to Financial Stress
Several factors are contributing to the growing financial stress of U.S. employees. Rising prices and inflation are major concerns, as 92% of respondents in Schroders’ 2025 U.S. Retirement Survey said they are worried about the impact of inflation on their savings. Furthermore, the economic uncertainty caused by President Donald Trump’s tariff announcements has led to increased 401(k) trading activity, but this has not resulted in significant asset sales. The majority of retirees surveyed (84%) said they wish they could better protect their savings from the effects of inflation. As one respondent noted, “Rising prices on essentials like housing, food, and healthcare have significantly diminished the purchasing power and financial security of retirees.”
“We believe that a lack of comprehensive retirement guidance is a major contributor to the financial stress experienced by retirees. To address this, we recommend that employers provide employees with financial planning tools and access to financial advisers to help them achieve their retirement goals,” said Deb Boyden, Schroders’ head of U.S. defined contribution.
The need for comprehensive retirement guidance has never been more pressing. A recent report by The Guardian Life Insurance Co. of America found that retirement-related challenges topped the list of financial concerns keeping Americans up at night. Maintaining a source of guaranteed income in retirement, having retirement savings last as long as needed, and being able to count on receiving full Social Security benefits in retirement were among surveyed employees’ top concerns.
| Top Financial Concerns | Description |
|---|---|
| Maintaining a source of guaranteed income in retirement | A steady income stream in retirement to ensure financial stability and security. |
| Having retirement savings last as long as needed | Ensuring that retirement savings can support living expenses throughout retirement. |
| Being able to count on receiving full Social Security benefits in retirement | Having access to the full amount of Social Security benefits in retirement to supplement retirement income. |
The Employee Benefit Research Institute’s recent Financial Wellbeing Employer Survey found that the cost of financial wellness initiatives may be a barrier for wider adoption by employers. Small employers were more likely to report costs to their employees as a challenge, which may have an adverse effect on enrollment.
- For 2025, employers’ top priorities include hiring and retention (59%), technology investment (43%), and meeting regulatory requirements while maintaining private market investment liquidity (38%).
- Employees want more comprehensive retirement guidance, including access to a financial adviser and goals-based retirement investment planning.
- Only 34% of employees and 43% of HR leaders rate their company’s partcipant education program as “very effective.”
In conclusion, the financial stress affecting U.S. employees is a complex issue that requires a comprehensive solution. By providing employees with financial planning tools, access to financial advisers, and comprehensive retirement guidance, employers can help alleviate financial stress and support employees in achieving their retirement goals.
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