The latest Wells Fargo/Gallup Investor and Retirement Optimism Index study apparently drove home some unpleasant truths about how participants view their 401(k) plans and those who provide or administer them.
In a blog post, the firm said that 81 percent of respondents said they did not want more retirement planning advice from their employers. Nor did they turn for advice to the financial firms that run their plans (only 22 percent said they did this) or even to their HR departments (just 11 percent think this is the way to go).
Where do they go, then? Well, 39 percent said they relied on themselves, friends or family to figure out this big thing called retirement saving.
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So Wells Fargo came up with some suggestions for plan sponsors and administrators on how to design their 401(k) plans to make the process easier for participants, and to persuade them that, in actuality, sponsors and administrators are good sources of retirement planning information.
Here are the four strategies the company advises.
1. Baby steps
If they're gonna act like kids and fight the process, be ready to reward any little move toward progress. After all, saving for retirement is not the easiest thing in the world, and most people are too stressed and overloaded to handle learning a whole new process all at once.
So make it both easy and convenient for them to take action, such as being able to nudge their savings level up with a single click when they review their balances online. Get them involved little by little, until they understand what they're doing and why — and see the results.
2. KIS
That's right, Keep It Simple. Make it a mindless process to get them started. Let them sign up as easily as possible, by postcard or with a single click online, without all sorts of complicated elections and choices that get them bogged down in the process until they just abandon it in frustration.
Oh, and don't make it complicated further down the line, so that they end up dropping out or sticking with inappropriate choices. Start simple, keep it that way.
3. Make like a robot and automate
Auto enrollment. Auto escalation. That's what they want, so give it to 'em. The last Wells Fargo study, according to the company, found that 75 percent of participants favor auto enrollment, and 66 percent want an automatic contribution increase on a regular basis. That way they don't have to remember to do it or jump through hoops to get it done.
Also, automatically putting contributions into target-date funds at least sets up their allocations in accordance with their time horizon to retirement — something else that makes the process less stressful.
4. Talk to me, baby
Give participants someone to talk with about their plans. Wells Fargo says that it provides "free retirement consultations … (that) focus on a series of questions that help participants determine where they stand today, and, the retirement savings goal they want to achieve to make it to and through retirement."
The company adds that "46 percent take specific actions after these retirement consultations."
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