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The Future of Financial Wellbeing: The New Whitepaper

Sponsored by Voya Financial

Voya is releasing a new whitepaper from its Voya Behavioral Finance Institute for Innovation: “Financial Wellness Meets Behavioral Economics: Helping Participants See the Big Picture and Act on It.” In the 21st century, American workers must prioritize both health and wealth when making financial decisions. As a result, they have to effectively allocate their savings across various financial products and accounts. Given the complexity of these choices, making the right choice requires workers to look at the bigger picture.

Within the paper, authored by Shlomo Benartzi, Professor Emeritus, UCLA Anderson School of Management, and senior academic advisor to the institute, Benartzi outlines opportunities and ideas for employers to help their employees maximize their health and wealth. To help allocate savings.

When it comes to saving for the future, many people look to their workplace for support, but the reality is that saving is often not enough. Today, workers are tasked with distributing their wealth across many different financial products and accounts, such as retirement accounts, emergency savings, health care and even education. With these competing financial priorities, nearly three-quarters (73%) of Americans feel like their money doesn’t go as far as it used to, according to new data from 1Voia.

In the new whitepaper, Benartzi examines a behavioral tendency known as “narrow framing”—the inability to see the “big picture.” When it comes to allocation of savings, narrow framing can lead people to fund in accounts that may not be financially beneficial to one’s needs and long-term financial well-being. For example, not saving for emergencies can leave people facing financial setbacks and costly debt, forcing them to seek money from their retirement savings.

“Since many individuals are susceptible to narrow framing in financial decision-making, it is important to provide workers with clear guidance on how to allocate their dollars across various financial categories, from savings accounts to health insurance plans,” Benartzi said. “Financial wellness is like physical wellness. If you want to be truly healthy, you have to develop a holistic plan that incorporates diet, exercise, and sleep. Financial wellness requires the same overall commitment. However, Help is often needed to think holistically about one’s finances, where employers have a unique opportunity to support their workforce.”

Using the tools and insights of behavioral economics, Benartzi suggests there are three primary actions employers can take to improve the overall financial well-being of their employees. Specifically, he recommends that employers create a platform that:

  1. Shows the big picture. When offering savings options to employees, it is important to provide them with the opportunity to save for retirement as well as for emergencies. Similarly, when offering health insurance options to employees, consider a combination of the cost of premiums and deductibles to provide a greater understanding of the total potential cost.
  2. Makes it easier to act on the big picture. Once individuals are able to see the big picture, it is equally important to be able to act on it. For example, when it comes to emergency savings, consider using the same autopilot tools that help workers save for retirement, including an escalator feature. For high-deductible health insurance plans, this may mean helping individuals redirect their savings from lower premiums to a health savings account or supplemental insurance plan.
  3. Personalizes the big picture. When it comes to saving, no one person is the same, which is why personal guidance is becoming more and more important. The best health insurance option, for example, will often depend on one’s expected medical use; Whereas the optimum allocation of savings will depend on how much they have saved and their retirement income goals.

“As household finance becomes more and more complex, narrow framing is becoming an increasingly expensive mental trend,” Benartzi said. “By reducing the impact of narrow framing, we can help employees better allocate their scarce dollars. The goal is to make the optimal choice the easiest option.”

Celebrating five years of behavioral science in action

Since its launch in 2016, studies and collective insights conducted through Voya’s Behavioral Finance Institute for Innovation have enhanced the digital experiences of more than 99% of Voya’s retirement plans and approximately 5,500,000 eligible retirement participants. This includes affecting more than 1 million qualified retirements. With participants’ retirement savings plans – and more than 375,000 individuals took action. 3 Improvements in participants’ savings rates also ranged from a meaningful 8% increase to, in some cases, a significant doubling of one’s savings rate. By merging behavioral science with the speed and scale of the digital world, the Institute continues to create large-scale solutions designed to help improve individual retirement outcomes.

As an industry leader focused on delivering health, wealth and investment solutions at and through the workplace, Voya Financial is committed to fulfilling its mission of making a secure financial future possible for all Americans – an individual, One family, one institution at a time.

1. Voya Financial Survey conducted in August. 27-30, 2021, 1,003 adults between the ages of 18+ in the US on the Ipsos eNation omnibus online platform, including 475 working Americans and 291 eligible for benefits
2. Includes Voya Enroll, Pweb Screen Change and Personalized Video Distribution.

3. Taking action, defined as being affected by a behaviorally modified digital intervention that increases the rate of participation or savings (eg, better defaults, saved by design, rate increases, more savings and savings email campaigns , and restart Personalized Video). This includes non-zero defaulters.
4. Depending on where a participant took action in the digital experience. Based on Beshears, Mason and Benartzi. “How to Choose a Default” (coming in 2021); Bhargava, Connell-Price, Mason and Benartzi. “Save (D) by Design” (Working Paper 2018).

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