New research from T. Rowe Price shows that your level of financial stress can connect with your financial wellness. In fact, retirement plan participants who report stress related to debt are saving less for retirement than those who are not stressed. Let’s take a look at how money stress can be a sign of poor financial wellness.
A financial advisor could help you create a financial plan to get on a stress-free path to managing your money.
Retirement Plan Participants Are Stressed About Money
T. Rowe Price says that your path to a successful retirement starts with financial wellness. This includes paying your bills on time, being prepared for emergencies, and making sure you have access to information and tools that can track your financial decisions and hold you accountable.
But research from the global investment firm shows that retirement plan participants are stressed about debt. And this is causing them to save less than those who are not stressed. The research shows that stress stems from several financial factors, including debt, budgeting and health care expenses.
According to the study, 33% of respondents are struggling to stick to their monthly budgets. Roughly one-third of those with student loan debt are having issues repaying it. And 20% of respondents are similarly struggling to pay off credit card debt or home equities.
Research also shows that this financial stress is taking a toll on young folks, women and racial minorities.
Among survey participants, 73% of workers age 30 and younger reported moderate to high levels of stress related to budgeting, while only 40% of older workers age 50 and older reported the same stress.
Research also shows that women are 26% more likely than men to experience higher levels of financial stress, specifically as it relates to debt, budgeting, nonretirement savings and health care expenses.
When it comes to race, the study found that Black and Latino workers are 34% and 40%, respectively, more likely to experience higher levels of debt-related stress than white workers.
Overall, 25% of respondents believe they will have to lower their standard of living in retirement.
How High Financial Stress Predicts Financial Wellness
T. Rowe Price found that financial stress and financial wellness are connected. And high levels of this type of stress can be used to predict poor financial wellness.
“It probably comes as no surprise that financial wellness and financial stress are two sides of the same coin,” the study says. “What our research found is that financial stress is a predictor of poor financial wellness.”
Workers told the global investment firm that their financial stress came from debt and failing to reach financial goals.
According to the research, 88% of respondents say that saving for an emergency is a major or minor goal. But almost one-quarter of respondents said they don’t make a lot of money or haven’t made any progress in reaching those emergency savings goals.
“When asked how they might pay for an unexpected expense, only one-third of the workers we surveyed claimed they had an emergency fund specifically allocated to meet that need,” the study says. “More common is the intention to use debt such as a credit card (43%) to pay for an unexpected expense.”
How Advisors Can Help Clients Manage Financial Stress
The T. Rowe Price study says that “78% of employees rely on their workplace for advice and support on how to achieve lifetime financial goals.”
Outside of the workplace, financial advisors can help workers create a financial plan to reduce financial stress. This could help them set, reach and adjust goals, depending on their financial needs.
The study shows that 37% of younger workers (ages 30 and younger) would like ongoing assistance with financial decision-making, coaching and strategies. This is the largest percentage reported by any age group range.
T. Rowe Price shows that financial stress is connected with poor financial wellness. Financial advisors can help workers reduce this stress and improve their financial wellness by creating a plan to track, reach and adjust their financial goals.
Retirement Planning Tips
- Working on a financial plan with a financial advisor is key to reaching and maintaining your retirement goals. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- SmartAsset’s free 401(k) calculator can help you estimate how much your retirement savings can grow over time.
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