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Despite the slight moderation of price increases with the most recent inflation report, economic conditions continue to deteriorate for millions of Americans. Costs remain extremely high, workers are rapidly exhausting their savings, and a recession appears highly likely. One of the most harmful aspects of this economic contraction is the effect it will have on the financial future for many American workers. Employees are already using their savings to cover immediate costs and some are even pulling money out of their retirement accounts.

Withdrawals like this cost workers huge sums of money over the long run and puts them in a precarious financial position when they retire. Companies should be doing everything they can to prevent employees from making early 401(k) withdrawals, such as providing financial advice, flexible benefits, and other forms of financial support as they navigate a difficult economic environment. At a time when companies are struggling to retain talent, implementing policies and programs to help employees manage their financial wellness enables them to maintain a healthy workforce.

Related: Time to repurpose benefits – and avoid employees pulling cash from their 401(k)s

It has never been more important for companies to provide robust financial support for their employees. They not only need assistance to get them through the next few months, but also strengthen their retirement portfolios in the long run.

Putting employees in a stronger financial position

In April 2020, total savings in the U.S. peaked at $6.42 trillion because of pandemic aid and declining consumer activity. This number has now fallen to $555.7 billion, the lowest since August 2009. Meanwhile, retirement savings is falling short, estimated at a deficit of $3.68 trillion and is expected to grow as American workers increasingly pull from their 401(k)s and other retirement accounts to cover urgent budget demands.