American workers are at the edge of a financial cliff

The economy is showing signs of improving, but Americans’ bank accounts are in need of resuscitation: Put simply, anemic pay raises combined with sharp increases in out-of-pocket health care costs have creditors knocking on many consumers’ doors.

Health care bills: Driving a credit crisis?

The 2014 Aflac WorkForces Report revealed a surprising number of workers are facing financial crises and are woefully unprepared not only for retirement, but also for medical expenses they’ll likely incur along the way.

Bottom line: Workers’ health care expenses – including insurance premiums and out-of-pocket costs – continue to outpace salary increases. Still, just 14 percent of employers who participated in the Aflac WorkForces Report survey believe the overall benefits packages they offer to workers are extremely influential on employees’ overall financial health. That’s surprising when you consider these facts:

66 percent of employees would not be able to adjust to the large financial costs associated with a serious injury or illness.

69 percent of workers at least somewhat agree they underestimate the total costs of an injury or illness, including medical, household and out-of-pocket expenses.

25 percent of workers completely or strongly agree their families are financially prepared for an unexpected emergency.

13 percent of workers are currently dealing with high medical bills.

49 percent of employees have less than $1,000 on hand to pay out-of-pocket medical expenses.

53 percent of workers would need to borrow from a 401(k) and/or use a credit card to cover unexpected medical costs.

Speaking of credit problems …

The Aflac survey revealed that health care costs have a long-lasting effect on American workers’ creditworthiness. Employees say medical costs are affecting their credit scores, keeping them from paying other bills and thwarting their efforts to save for a rainy day or retirement:

38 percent say high medical bills have hindered their ability to save.

10 percent say high medical costs have negatively affected their credit scores.

13 percent have been contacted by collection agencies about outstanding medical bills.

Due to medical bills:

6 percent have missed a credit card payment.

4 percent have missed a car payment.

4 percent have missed a mortgage or rent payment.

3 percent have had to file bankruptcy.

A not-so-comfortable retirement?

The Aflac WorkForces Report reveals that U.S. workers fear they lack the resources needed to finance comfortable retirements. But that’s not all: There’s evidence they are also unprepared to cope with lesser financial issues. In addition to being ill-equipped to meet unexpected long-term monetary challenges, they’re struggling with routine expenses – and they’re also lethargic about planning for the future.

Survey participants named these issues1 as key financial challenges:

56 percent don’t have financial plans in place to help them achieve specific financial goals and prepare for unexpected challenges or events.

52 percent are currently coping with financial challenges.

56 percent are concerned about reducing debt.

31 percent are extremely or very confident about their financial futures.

42 percent will be older than expected when they retire.

82 percent attribute their retirement delays to financial unpreparedness.

19 percent say their goals and dreams are financially protected.

Survey participants named these issues as their top financial challenges:

  • 51 percent -- Saving for retirement.
  • 29 percent -- Not earning enough money.
  • 29 percent -- Having enough money to meet current expenses.
  • 25 percent -- Paying off debt other than a mortgage or student loan.
  • 23 percent -- Paying off a mortgage.
  • 21 percent -- Saving to make a major purchase.
  • 16 percent -- Paying off student loans.
  • 14 percent -- Saving for children’s or grandchildren’s education.

Worry and the workplace

Employees’ concerns about their financial stability affect them not only during their off-hours, but on the job too – and those concerns can lead to increased absenteeism, decreased productivity and worker distraction. Here are just a few reasons employers should put together strong benefits packages and market those packages to employees with clear, concise and relevant communications.

24 percent of workers named “personal financial issues” as the top non-work-related issue that distracts them on the job.

Just 41 percent of workers completely or strongly agree they have peace of mind or can sleep at night.

57 percent of workers say they would be likely to take a job with lower pay but better benefits.

48 percent of workers say they are likely to look for a new job in the next 12 months.

41 percent of workers who admit they're likely to look for new jobs in the next 12 months say improving their benefits packages would keep them in their current jobs.

Location matters

Apparently location matters in issues other than real estate, because the Aflac WorkForces Report reveals that top health care concerns and related financial issues vary by region. Here’s a look at how things shape up in the Midwest, Northeast, South and West:2

Midwestern employees are more likely than those of any other region to say they do not have a plan in place to help achieve their financial goals and prepare for the unexpected.

Employees in the Northeast are less likely than those of all other regions to say they would need to borrow from a 401(k) and/or use a credit card to cover unexpected medical costs.

Southern workers are more likely than those in all other regions to say they have been contacted by a collection agency about outstanding medical bills.

Employees in Western states are more likely than those in any other region to say they are extremely or very satisfied with their jobs.

The 2014 Aflac WorkForces Report is the fourth annual Aflac employee benefits study examining benefit trends and attitudes. The study, conducted in Jan. 2014 by Research Now, captured responses from 1,856 benefits decision-makers and 5,209 employees from across the United States. To learn more about the Aflac WorkForces Report, visit Aflac

1 Some participants indicated more than one financial challenge; therefore, total responses do not add up to 100 percent.

2 For the purposes of the Aflac WorkForces Report, Midwestern states include Illinois, Indiana Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin. Northeastern states include Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont. Southern states include Alabama, Arkansas, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia and West Virginia. Western states include Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming.

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