Three Ways Your Employer Can Improve Your Finances | American Funds

  • Forms
  • MY ACCOUNTS
  • INVESTMENTS
  • INSIGHTS
  • PRODUCTS
  • PLANNING
  • SERVICE & SUPPORT

Retirement Planning

OCTOBER 2017

Three Ways Your Employer Can Improve Your Finances

Going above and beyond traditional retirement plans, companies are offering financial wellness perks that can strengthen your bottom line.

Forget free snacks and standing desks: The best employer-sponsored perks may be closer to your wallet.

Most employees are aware of their company's retirement plan, but fewer are aware of the expanding list of financial resources many employers have begun to offer in recent years. In fact, nearly six out of 10 employers say they’re very likely to offer a financial well-being program, according to a recent survey by human resources consulting firm Aon Hewitt. That’s up from just 30% who said the same in 2014.

These financial perks are available to workers at different life stages. Here are three you should know about:

1. Financial Education

Today, 58% of employers make a financial education tool available to their workers, and 84% expect to do so by the end of the year, according to Aon Hewitt.  

Some companies offer financial-planning seminars and one-on-one counseling on topics like retirement planning, college savings and investing fundamentals. Others provide tools and programs ―from mobile apps to workplace initiatives ― that aim to improve their employees’ financial behavior.

For instance, you might earn a reward for taking a financial wellness self-assessment test or for paying down student loan debt. Some employers even offer apps that help you better manage your spending by linking to your checking account and sending helpful alerts.

Sound financial advice is a good idea at any stage of your career. In fact, employees who have been offered financial education at work for more than two years are generally less stressed, more financially savvy and better prepared for retirement, according to a study conducted by the International Foundation of Employee Benefit Plans.

What you should know: Programs that provide general financial education are valuable, but you could get more personalized guidance by connecting with your own financial advisor.

2. Employer-Sponsored 529 Accounts

Saving for retirement in a 401(k) plan is a given for tens of millions of U.S. workers. Now, companies are offering a similar option for college savers: corporate 529 plans. You can save for your retirement and your child’s education at the same time by having the contributions taken directly from your paycheck.

While relatively new, workplace 529 plans are catching on: According to Aon Hewitt, more than 20% of companies today offer or are likely to offer a tool that helps employees contribute to a 529 plan.

“We are seeing a steady uptick in the number of employers offering college savings plans in the workplace,” says Kris Spazafumo, vice president and senior product manager of Investment Services Wealth Management at Capital Group.

Having 529 contributions automatically deducted from your paycheck can help make investing easier. Some employers even offer to match employees’ 529 contributions. You can use a workplace 529 plan to save for your child’s college tuition or for yourself (if you intend to go back to school).

What you should know: When you open a 529 account on your own, you can choose any plan from any state. If you sign up through work, you might be limited to plans offered by your employer, which means you might miss out on potential state income tax deductions.

3. Corporate Student Loan Debt Repayment 

Many employees weren’t able to pay for their college education in full and are starting careers carrying student loan debt. Some companies are trying to attract and retain the best workers by offering to help pay down those loans.

In fact, the average student loan balance for new grads today is more than $37,000, according to Cappex, a website that helps match students with colleges and scholarships. No wonder 22% of employers now offer to help repay their employees’ student loans and 72% are planning to offer this perk, according to a recent survey by executive outplacement firm Challenger, Gray & Christmas.

Student loan repayment can range from $500 to $10,000. Some companies even offer to match their employees’ debt repayments.

If you’re in a position to take advantage of this perk, it could really benefit your financial future. Lowering your student loan burden frees up cash that can be deployed to save for retirement and other financial goals.

What you should know: Remember that money you receive from your employer to pay down your student loan is considered taxable income.

Be sure to look beyond the retirement saving and health insurance typically offered by employers. Ask about vehicles that could help you pay off past debt, save for future education and manage your finances throughout your career.

$5,500

IRA ANNUAL CONTRIBUTION LIMIT
 
The annual contribution limit for an IRA is $5,500 ($6,500 for anyone over 50). American Funds IRAs offer tax-advantaged savings, a broad range of investment choices and low fees.
 

Source: IRS/American Funds


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.