In the retirement planning industry, a consistent concern among all parties involved - advisers, plan sponsors, recordkeepers and employees - is that individuals don't save enough. While there are a wide variety of reasons that drive participant savings motivations and behaviors, there is one solution that can overcome a number of common obstacles quickly: technology.
When the retirement world shifted from defined benefit plans to defined contribution plans, the burden of saving and investing moved, too - from the employer to the individual. However, the retirement plan enrollment and contribution processes remain cumbersome, and most individuals don't have the background to understand them well enough to make successful decisions.
To help, many companies offer employees an enrollment book or grant them access to a retirement portal that they are left to navigate on their own. In the best of cases, participants are invited to take part in an on-site enrollment meeting where they can ask questions directly of an adviser. But these approaches often further confuse the process and instead of making saving simpler, it becomes more daunting. And many employees end up taking the easiest path: no action at all.
The fewer steps required in the enrollment process, the greater the results, and some industry leaders have responded with technology that streamlines the process. Since recordkeepers have all demographic information about participants (assuming the employer supplies it), to further simplify enrollment, that data can be used to pre-populate an enrollment link or form so that employees only need to check a few boxes to indicate how much they want to save and where they want to invest their money. Including default options in these "quick enroll" processes further eases participants' decision-making and can impel them to act sooner.
Some companies are trying to make the enrollment process even more accessible by enabling it by mobile phone. One company's innovative adviser tool leverages handheld devices to guide employees through the entire enrollment process, starting with explaining how to set an appropriate savings level and asset allocation.
With this interactive tool, users can make key savings and investment decisions in just minutes from anywhere, rather than requiring them to login to their computer. In pilot studies, 96% of employees who used the service chose to participate in their company retirement plan, compared to the industry average of 68.8%.
Advisers can leverage the mobile technology as well. It is not realistic to bring a laptop for every employee who attends an enrollment meeting to enable them to log in and adjust their account.
But if the recordkeeper has an app, participants can download it at the meeting and the adviser can walk them through the enrollment process, help them increase their savings or adjust their asset allocation - all while the audience is captive and ready to act.
Results speak for themselves
It is not just the enrollment process that benefits from technology. Employees' futures can be well illustrated through tools that show each employee how their savings efforts today will translate into a check after they enter retirement.
A few recordkeepers offer tools on their websites that show employees where their retirement savings may land them based on their current actions (e.g. how much they contribute, their current balance, working years left, where they invest their money, etc.). By painting a full picture, participants can easily visualize whether they're on track to the retirement they want, or if they need to make adjustments to change the outcome.
One mid-market provider has introduced another element into its planning tool by displaying not only retirement income projections on the participant's website, but also health care costs in retirement in the same calculation. The significant difference with this approach is that it incorporates all relevant retirement information - savings and costs - in one place to enable users to more realistically gauge their progress toward their goals.
Understanding what their futures hold can help employees understand what they need to set aside to have the retirement they want. By enabling this level of transparency and control, these technology solutions can give employees better confidence that they can retire on time. What does that mean in the workplace? Happier, more productive employees.
Similar to the way they have grown accustomed to social media, participants want retirement information delivered to them via simple and straightforward tools. As the industry is pushed to better engage employees and drive them to positive decisions quicker - driven in part by the federal government, which is advocating for retirement estimates on employees' quarterly statements - a small number of companies are now maximizing technology to its full potential to answer the call.
Sampson is managing principal of Cornerstone Retirement Advisers, a Retirement Partners Group (RPG) member firm based in Warwick, R.I. RPG is a network affiliated with LPL Financial. Securities and Retirement Plan Consulting Program advisory services offered through LPL Financial, Member FINRA/SIPC. Other advisory services offered through Independent Financial Partners, a Registered Investment Advisor and separate entity from LPL Financial. Reach him at firstname.lastname@example.org.
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