The Financial Stress Toll (of Late)

In a recent survey by the American Psychological Association, more than 80% of American adults said they were feeling increased financial stress due to:

• Higher inflation (87%)
• Ongoing supply chain issues caused by the pandemic (81%)
• Global uncertainty due to the war in Ukraine (81%)

Furthermore, hardships related to the pandemic — including poor health, loss of loved ones, difficult work and family situations, isolation and inconvenience — have affected the entire nation and the world. In the U.S., 63% of respondents said COVID-19 has changed their life forever.¹

A 2021 Employee Financial Wellness Survey by PwC found that since the onset of the pandemic, workers were two times more likely to use a payday loan service, take a loan or distribution from their retirement account or consider postponing retirement altogether. They also were four times more challenged in paying their regular household expenses.²

Following the initial impact of COVID-19, the U.S. has followed a somewhat “K”-shaped recovery. This happens when the lower “arm” of the K drops because certain demographics become financially worse off than they were before, while the top arm shoots upward as other demographics benefit from higher savings rates and the stock market recovery.³ According to a Pew Research study, 20% of adults under age 50 were earning more than before March 2020, while 58% of people older than 50 reported earning lower wages than before the pandemic.⁴

Regardless of which trajectory your household may have experienced, high inflation is affecting everyone. Some economists predict that prices will stabilize as we move through 2022.⁵ However, note that throughout history the economy has gone through cyclical stages when inflation has reared its ugly head. It is particularly important that you plan for this contingency during your retirement years, when most people live on a fixed income. If you’re interested in learning ways to position your assets to help accommodate periods of rising prices during retirement, feel free to contact us.

The financial toll of stressed-out employees also has impacted companies. One study concluded that workers who are chronically worried about money are far less productive each week, which has led to a combined $4.7 billion in losses per week for employers.⁶ In an effort to ease money concerns among the workforce, some companies have begun offering more financial wellness programs, such as low-interest installment loans, medical deductible financing repaid through payroll deductions, and student loan repayment programs (including employer contributions toward student debt and the ability to convert PTO hours to student loan payments).⁷

Content prepared by Kara Stefan Communications.

¹ American Psychological Association. March 2022. “Stress in America.” https://www.apa.org/news/press/releases/stress/2022/march-2022-survival-mode. Accessed March 28, 2022.

² PwC. 2002. “2021 PwC Employee Financial Wellness Survey”. https://www.pwc.com/us/en/services/consulting/workforce-of-the-future/library/employee-financial-wellness-survey.html. Accessed March 28, 2022.

³ Erin Gobler. The Balance. April 5, 2021. “What is a K-Shaped Recovery?” https://www.thebalance.com/k-shaped-recovery-5120738. Accessed April 14, 2022.

⁴ Pew Research Center. March 5, 2022. “A Year Into the Pandemic, Long-Term Financial Impact Weighs Heavily on Many Americans”; https://www.pewresearch.org/social-trends/2021/03/05/a-year-into-the-pandemic-long-term-financial-impact-weighs-heavily-on-many-americans/. Accessed March 28, 2022.

⁵ Daniel Bachman. Deloitte. March 17, 2022. “United States Economic Forecast.” https://www2.deloitte.com/us/en/insights/economy/us-economic-forecast/united-states-outlook-analysis.html. Accessed March 28, 2022.

⁶ Ted Godbout. American Society of Pension Professionals & Actuaries. Aug. 25, 2021. “Employee Financial Stress Costs Companies Nearly $5B a Week.” https://www.asppa.org/news/employee-financial-stress-costs-companies-nearly-5b-week. Accessed March 28, 2022.

⁷ Nick Ott. Human Resource Executive. May 24, 2021. “4 benefits that will help workers improve their financial health.” https://hrexecutive.com/4-benefits-that-will-help-workers-improve-their-financial-health/. Accessed March 28, 2022.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.

4/22-2116961C