Holistic approach re-energizes retirement plan engagement

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The conversation benefit advisers are having with employers and their employees about retirement planning no longer centers on some future destination date; it increasingly addresses finances as a bigger picture, a whole life scenario. Educating employers and employees using this more holistic approach, advisers say, has increased employee understanding and engagement in retirement benefit plans.

“Employees are experiencing a lot of stress related to managing their finances,” says Megan Yost, vice president and head of participant engagement within State Street Global Advisors' Defined Contribution Team. “One of the big themes that we’re seeing in 2015 within the benefits space is taking a more holistic look at financial planning, generally toward financial wellness. And this is really re-energizing the retirement conversation.”

“It helps to frame retirement in a broader sense for employees, which may be more in tune with where they are in their life stages,” she adds.

Using this holistic approach makes engagement less about educating employers and employees about general financial principles and more about financial well-being, says Yost.

It’s important for employers to recognize that debt management and retirement savings go hand in hand, say Annamaria Lusardi, director of the Financial Literacy Center and Robert Clark of North Carolina State University.

“Employers who help employees manage their current debts will enhance the ability of those employees to make contributions to retirement plans in the future,” they say in a report for the Financial Industry Regulatory Authority Investor Education Foundation.

“For many people, it might be important to first address other savings needs before contributing to a retirement savings account. However, if lack of saving results simply from inertia or a lack of understanding of the benefits offered by their employer, then information to address these barriers might increase participation,” Lusardi and Clark add.

Paired communication

When advisers and employers are communicating with employees about retirement, Yost says they can think about pairing those communications with messages about spending sensibly or offering savings boot camps.

Advisers and employers should also work to simplify their messages, avoiding complex terminology, investment or legal jargon and acronyms, she says, adding that communications should be more bite-sized and frequent throughout the year.

Advisers and employers should “move away from the once a year, one and done model, toward more consistent and regular communications about finances,” says Yost.

Employee education about retirement and financial wellness can be more effective when it’s made relevant for the employee. Yost says generally people are more engaged with their retirement planning at different inflection points in their lives, including changing jobs and having a baby.

“At those different points in your life you’re more apt to pay attention to how you’re managing your finances,” she says, considering options about whether to save more, review investment allocations, etc.

Employers can target education communications around those inflection points, especially for new hires or when addressing specific age groups of employees about financial goals.

Lusardi and Clark say employers should regularly remind employees of the value of a retirement plan.

“There are specific times that can be teachable moments: at annual reviews, following a promotion, at match eligibility, or upon being vested in other pension plans, as well as at individual life events that might lead workers to alter other benefits, such as health insurance plan options,” they say.

“You can’t over communicate about retirement,” says Yost. “Employees really welcome, want and need more assistance from their employers. They’re looking to hear more from them.”

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Retirement benefits Retirement education