401(k) plans can be an attractive workplace benefit. However, research also shows that there is an education gap. Seventy-one percent of respondents to a recent Fisher Investments survey failed a basic 401(k) IQ quiz, missing at least three of the nine basic questions.
While this may not be surprising to many plan advisers, what is interesting is that two out of three Americans are currently dissatisfied with their employer’s 401(k) service, and 50% are dissatisfied with the level of education and support they receive. So how do advisers close the 401(k) education and confidence gap so that Americans can get on a healthy retirement life path — and ultimately increase satisfaction among customers?
1) Provide more personalized guidance: Americans won’t find the solution that they need in the oversaturated financial digital world that we all live in; instead they are looking for a personal, hands-on approach. One out of five Americans in our survey said they wish they had more personal support, such as 401(k) training sessions and one-on-ones with retirement counselors, as 50% feel a lack of education and support from 401(k) providers. Providers should consider how they can create more opportunities to provide this personal guidance that Americans are seeking.
2) Focus on education: Beyond just personal support, Americans need more education as a whole. Our survey revealed that people tend to get the overall big picture (like their 401(k) match) but when it comes to investment specifics, such as defining a mutual fund and the percent of the salary that they should invest, they quickly struggle. Most startling is that 25% of Americans aren’t involved in selecting their 401(k) investments. If people don’t understand how to successfully pick investments to reach their retirement goals, they may not save enough into their plan, and they won’t be set up for success in the long-term.
3) Make 401(k)s a workplace movement: While getting Americans to be more confident about their financial future includes providing them with support and education about their 401(k) plan, one of the greatest challenges can be encouraging participation among employees. However, benefit decision-makers are uniquely positioned to address this issue. As an adviser, you can counsel your clients on how to make a 401(k) a fundamental benefit that everyone participates in and understands. Our survey found that many people get their retirement advice from friends and family, so it’s critical that you work with clients to make 401(k) a grassroots movement within their workplace. Work with them to identify an employee who can serve as trend setter for the rest of the office. This individual can demonstrate to colleagues the benefits offered by your company, and the merits of planning for retirement. Even better, engage Americans at a young age, as 39% of respondents wish they started their 401(k) plan investments earlier in life.
Also see: “20 young leaders in benefits.”
As evident in our survey, people want help to be set up for a healthy retirement. The data shows a clear connection between retirement and employee engagement and retention. Despite the efforts of many talented and hardworking members of the retirement community, I see these findings as wake-up call. However, the results shouldn’t be seen as an indictment of the industry, but rather a challenge for us to do better to educate and engage employees about 401(k) plans. We have an opportunity to help Americans better understand their retirement plan — and ultimately create a retirement ready culture.
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