allworth-financial-logo-color
    • Wealth Management
      • Financial Planning
      • Investment Management
      • Tax Planning
      • Estate Planning
      • Insurance Services
    • 401(k) For Employers
    • For Airline Employees
    • Our Approach
    • Why People Work With Us
    • Office Locations
    • FAQs
    • Our Fees
    • Our Story
    • Advisors
    • Our Leadership
    • Advisory Firm Partnerships
    • Allworth Kids
    • Webinars & Events
    • Podcasts
    • Financial Planning
    • Investment Management
    • Tax Planning
Meet With Us
  • Locations
  • Login
  • Contact

The Tale of Two Economies: Promoting Workplace Benefits in a K-Shaped Economy

  • Share this post

More than a year into the COVID-19 pandemic, there are signs of recovery in the U.S. Millions of vaccines have been administered, businesses and offices are reopening and life is starting to look more like it did pre-pandemic.

All this is cause for optimism. Simultaneously, however, there’s abundant evidence that the pandemic has taken a financial toll on Americans, and it’s hit some harder than others. As the economy begins to bounce back, we are experiencing what is called a K-shaped recovery. When plotting the impact of an economic downturn, and its subsequent recovery, on a graph, a K shape is formed, showing some industries and demographics recovering quickly, while other stagnate and may sink further. More financially secure individuals are likely to be on the upward facing arm of the K, falling into the demographic that recovers quickly and continues to grow, while others, on the downward sloping leg of the K, struggle to make ends meet. 

Your diverse workforce likely includes both. Chances are, some were even forced to put their retirement in jeopardy, stopping or reducing savings to meet more immediate financial needs. 

The Pandemic Recovery Is Uneven

Why the term “K-shaped recovery?” Simply put, not everyone is experiencing recovery at the same pace. Individuals who were prepared for a financial emergency—those with savings or an emergency fund, for instance—fared better than those living paycheck to paycheck. In fact, some Americans were transformed into “super savers” within weeks of the COVID-19 outbreak. In fact, 52% of households dramatically reduced spending.[1] High earners were the most likely to cut back. As a result, America’s savings rate soared from just under 10%, where it stagnated for the last two decades, to a record 33.7% in April 2020.[2] 

 

For those who were not as prepared, the situation looked noticeably different. Nearly a third of Americans (30%) report that their financial situation is worse now than it was before the pandemic.[3] Among them, half said that job loss was a major reason why. In addition, a majority are worse off when it comes to saving for retirement (73%) and emergencies (72%). In addition, 23% tapped into their retirement savings prematurely or stopped saving altogether during the COVID-19 pandemic, putting their future security in peril.[4]

 

Workers Felt the Impact Differently

The pandemic also impacted workers of different stripes. Many full-time W-2 employees who kept their jobs—especially white-collar workers—were able to transition to working from home when their offices closed. They may have felt little, if any, impact on their household finances.

Contract workers, on the other hand, suffered significant financial setbacks in terms of income, emergency savings, retirement savings and benefits. In fact, 53% of contractors were earning half or less of their pre-pandemic income vs. 14% of traditional workers.[5] As a result, contract workers may need more help than traditional employees to improve their financial well-being during the pandemic recovery.

 

The impact of the financial fallout was also felt across income brackets. Both highly-compensated employees (HCEs)—those making $130,000 or more per year, or those with at least a 5% stake in a business—and non-highly compensated employees experienced retirement savings challenges due to layoffs, business disruptions and delayed or deferred plan contributions. As businesses cut costs to survive, highly-compensated employees might have missed out on employer contributions, such as top-heavy minimum contributions. For their part, non-highly compensated employees might have stopped retirement plan contributions due to job loss, wage cuts or the need to divert funds elsewhere for near-term needs.

Take a Solutions-Oriented Approach
No matter their current financial status, working Americans have a common goal: getting back on track with their retirement savings. To maximize the impact, employers must first understand the disparate nature of a K-shaped recovery. Employees at the top of the K, who tend to be more financially stable, are likely more ready, able and willing to increase their savings or start saving again. Conversely, those at the bottom of the K, who may have had extended periods of unemployment and financial hardship, likely need more help to get back on their feet so they can save for the future. Employers must consider both points of view when evaluating benefits programs.

Employees who are more financially secure may value insights on: 

  • Increasing net worth
  • Purchasing or renovating a home
  • Improving their retirement savings
  • Diversifying their portfolios
  • Capitalizing on market opportunities
  • Tapping their home equity

Those still experiencing or emerging from financial insecurity may require guidance and support around:

  • Budgeting
  • Job loss
  • Rebuilding, starting, or delaying retirement savings
  • Creating an emergency fund
  • Paying down debt
  • Managing healthcare costs 

In a world irrevocably altered by the COVID-19 pandemic, employers must embrace innovation in the benefits they provide to support employee financial well-being. These benefits should extend beyond their retirement savings plan to include education and mentorship through financial wellness programs. Offering access to personalized financial guidance, along with practical and actionable tips to build savings and wealth, can go a long way to provide support where it’s needed most. 

 

[1] Royal, James. “Survey: Majority of Americans have cut their spending because of coronavirus concerns.” Bankrate. March 31, 2020.

[2] U.S. Bureau of Economic Analysis. Personal Saving Rate [PSAVERT], retrieved from FRED, Federal Reserve Bank of St. Louis.

[3] Brown, Kathi S. “How Financial Experiences During the Pandemic Shape Future Outlook.” AARP Research. Updated May 2021.

[4] Brown, Kathi S. “How Financial Experiences During the Pandemic Shape Future Outlook.” AARP Research. Updated May 2021.

[5] Prudential. Flexible Workers: Impact of the Pandemic. Nov. 20, 2020.

©401(k) Marketing, LLC. All rights reserved.

Give yourself an advantage. Sign up to receive monthly insights from our Chief Investment Officer, and be the first to know about upcoming educational webinars. You'll also get instant access to our retirement planning checklist.

Related Articles
See more articles
April 30, 2025 7 Tips to Help Participants with Long-Term Saving Read Now
March 31, 2025 Should You Consider Auto-Features for Your Retirement Plan? Read Now
February 28, 2025 What Does a 401(k) Committee Do?

How a 401(k) committee can support with plan success. Who is making sure that your retirement plan works for you, your company, and your employees? …

Read Now
Allworth Financial logo
Talk with an Advisor Contact us
  • Services
    • Wealth Management
    • 401(k) For Employers
    • For Airline Employees
  • Working With Us
    • Why People Work With Us
    • Office Locations
    • FAQs
    • Our Fees
    • Client Login
  • About Us
    • Advisors
    • Our Leadership
    • Advisory Firm Partnerships
    • Allworth Kids
    • Careers
    • Form CRS
  • Insights
    • Workshops & Events
    • Podcasts
    • Financial Planning
    • Investment Management
    • Tax Planning

Newsletter

Subscribe to receive monthly insights from our Chief Investment Officer, and be the first to know about upcoming educational webinars.

©1993-2025 Allworth Financial. All rights reserved.
  • Privacy Policy
  • Disclosures
  • Cookie Preferences
  • Do Not Sell or Share My Personal Information

Advisory services offered through Allworth Financial, a Registered Investment Advisor

Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Check the background of this firm on FINRA's BrokerCheck.

HMRN Insurance Agency, LLC license #0D34087

Rankings and/or recognition by unaffiliated rating services and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Allworth is engaged, or continues to be engaged, to provide investment advisory services.  Rankings should not be considered an endorsement of the advisor by any client nor are they representative of any one client’s evaluation or experience. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized advisor.  Therefore, those who did not submit an application for consideration were excluded and may be equally qualified.

1.  Barron’s Top 100 RIA Firms: Barron’s ranking of independent advisory companies is based on assets managed by the firms, technology spending, staff diversity, succession planning and other metrics. Firms who wish to be ranked fill out a comprehensive survey about their practice. Allworth did not pay a fee to be considered for the ranking.  Allworth has received the following rankings in Barron’s Top 100 RIA Firms: #14 in 2024, #20 in 2023 and #31 in 2022. #23 in 2021, #27 in 2020.

2.  Retention Rate Source: Allworth Internal Data, FY 2022

3 & 9.  NBRI Circle of Excellence and Best in Class Ethics:  National Business Research Institute, Inc. (NBRI) is an independent research firm hired by Allworth to survey our customers. The survey contains eighteen (18) scaled and benchmarked questions covering a total of seven (7) topics, and a range of additional scaled, multiple choice, multiple select and open-ended question and is deployed biannually. NBRI compares responses across its company universe by industry and ranks the participating companies in each topic. The Circle of Excellence level is bestowed upon clients receiving a total company score at or above the 75th percentile of the NBRI ClearPath Benchmarking database.  Allworth’s 2023 results were compiled from 1,470 completed surveys, with results in the 92nd percentile. Allworth pays NBRI a fee to conduct the survey.

4.  As of 1/1/2025, Allworth Financial, an SEC registered investment adviser and AW Securities, a registered broker/dealer have approximately $26 billion in total assets under management and administration.

5.  Investment News Best Places to Work for Financial Advisors:  Investment News ranking of Best Places to Work for Financial Advisors is based on being a United States based Registered Investment Adviser with a minimum of 15 full or part-time employees working in the United States and having been in business for over a year.  Firms who meet Investment News’ criteria fill out an in-depth questionnaire and employees were asked to take part in a companywide survey.  Results of the questionnaire and employee surveys were analyzed by Investment News to determine recipients.  Allworth Financial did not pay a fee to be considered for the ranking.  Allworth Financial has received the ranking in 2020 and 2021.

6.  2021 Value of an Advisor Study / Russel Investments

7.  RIA Channel Top 50 Wealth Managers by Growth in Assets:  RIA Channel’s ranking of the Top 50 Wealth Managers by Growth in Assets is based on being an active Registered Investment Adviser with the Securities and Exchange Commission with no regulatory, criminal or administrative violations at the time of the ranking, provide wealth management services as their primary business and have a two year growth rate of 30% based on assets reported on Form ADV Part 1 at the time of ranking.  Allworth Financial did not pay a fee to be considered for the ranking.  Allworth Financial received the ranking in 2022.

8.  USA Today Best Financial Advisory Firms: USA Today’s ranking of Best Financial Advisory Firms was compiled from recommendations collected through an independent survey and a firm’s short and long-term AUM growth obtained from public sources. Allworth Financial did not participate in the survey, as self-recommendations are prohibited from consideration, and all surveyed individuals were selected at random. Allworth Financial did not pay a fee to be considered for the ranking. Allworth Financial received the ranking in 2024.

Tax services are provided by Allworth Tax Solutions, an affiliate of Allworth Financial. Allworth Financial does not provide tax preparation services or advice.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Important Information

The information presented is for educational purposes only and is not intended to be a comprehensive analysis of the topics discussed. It should not be interpreted as personalized investment advice or relied upon as such.

Allworth Financial, LP (“Allworth”) makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of the information presented. While efforts are made to ensure the information’s accuracy, it is subject to change without notice. Allworth conducts a reasonable inquiry to determine that information provided by third party sources is reasonable, but cannot guarantee its accuracy or completeness. Opinions expressed are also subject to change without notice and should not be construed as investment advice.

The information is not intended to convey any implicit or explicit guarantee or sense of assurance that, if followed, any investment strategies referenced will produce a positive or desired outcome. All investments involve risk, including the potential loss of principal. There can be no assurance that any investment strategy or decision will achieve its intended objectives or result in a positive return. It is important to carefully consider your investment goals, risk tolerance, and seek professional advice before making any investment decisions.