Employers are learning they need to do more to try to educate their workers about retirement.
So says Rebecca Katz, a principal with Vanguard Participant Strategy and Development, noting that the increase in the use of auto features and breakthroughs in web-based technologies have already helped transform retirement education in the workplace and are making it easier for participants to save.
In the past, companies educated their employees sporadically, informing new hires about their defined contribution plan, communicating changes to the plan, such as a new record keeper or new plan options, or helped departing employees with distribution options. But those days are over.
Auto-enrollment and auto-escalation, target-date funds, managed accounts, default options and re-enrollment on the investment side have produced “large-scale behavioral change” in plans adopting these features, Katz said. These changes are happening more quickly than typical education programs have been able to deliver.
Retirement education programs today need to be available when participants are ready to act, so that employers can provide them with the information they need and frame choices for them on demand. This is particularly true for participants in their 40s, 50s, and 60s who are closer to retirement and tend to have larger balances and a greater need for education at critical points in their lives, she added.
The increasing use of auto features in plans and their success in boosting plan enrollment and diversifying portfolios also is shaping how Vanguard and sponsors approach retirement education in plans that don’t offer these features.
Simple is best, she said. Most workers don’t want to be inundated with educational materials. They just want to know the one or two things they need to do to get themselves on track for retirement.
The rise of technology has made it easier for companies like Vanguard to reach employees. Many offer mobile apps to help plan participants manage their accounts or explore their options.
“We have collected a lot of data about our participants and we are using it to target participants with the information most relevant to their personal situation,” Katz said.
She believes that retirement education in the workplace will continue to become more targeted and relevant to the lives of workers as plan features and new technologies become more sophisticated. Effective retirement education in the workplace depends on understanding participant needs and targeting specific populations in ways that feel personal to them; using scientific rigor in developing effective communications strategies by regularly testing and measuring outcomes; and incorporating behavioral finance principles that make it easier for workers to save for retirement and make other wise decisions, she said.