Middle-Income Workers' Financial Plans Fall Short

Just more than one-third of American workers (37%) with annual incomes between $35,000 and $100,000 have a comprehensive financial plan, according to a study by Financial Engines, compared to nearly half (48%) of workers who earn $100,000 or more per year.

Wealthier American workers also tend to have financial plans that are more complete than their middle-income counterparts, the study found. For example, plans for middle income workers are less likely to address saving and investing to grow overall assets (86% middle income versus 95% upper income), saving for a child’s college education (41% versus 61%), purchasing life or disability insurance (67% versus 83%) or estate planning (57% versus 77%). Both middle- and upper-income plans also tend not to address important topics, such as the adequacy of a savings rate to achieve retirement goals or strategies to maximize Social Security benefits.

Besides a plan for retirement savings, the most common topics included in individual financial plans across all income groups were saving and investing for overall asset growth (88%), budgeting (83%), generating income in retirement (73%) and minimizing taxes (73%). The least common topics included in comprehensive financial plans were saving/paying for college education (46%), saving for a home or home improvements (53%), and Social Security claiming (59%).

The study found people who have a financial plan reported saving a median of 10% of their salaries toward retirement. People without a plan saved a median of 6% of their salaries toward retirement.

More than half (57%) of all plan participants said they were extremely or very interested in accessing financial planning help via the workplace. More than two-thirds (67%) of middle-class workers who created their existing financial plan without professional help were very or extremely interested in accessing financial planning help via the workplace.

Overall, 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 also more likely than the average worker (52% versus 44%) to say having a financial planner vetted by their employer is a major advantage.

Financial Engines’ Beyond Retirement Advice report may be downloaded from here.