It seems counterintuitive, but the design of the website used by participants to make investment choices as well as other decisions in their retirement plans can have an outsize effect on those choices — and on the outcomes for those retirement savers.

A paper by Shlomo Benartzi, UCLA professor and senior academic advisor at the Voya Behavioral Finance Institute for Innovation, finds that such factors as how many lines are provided for investor choices of funds can result in vastly different results from, say, four to eight.

“The Digital Fiduciary: Overseeing Retirement Plans in the Digital Age” points out that it's no longer enough to make sure that the investment choices provided to plan participants are appropriate – plan sponsors also need to consider how participants behave in the digital age.

Pointing out that “plan participants now typically make their investment choices on a screen rather than on paper,” Benartzi writes about an experiment he and Richard Thaler conducted on Morningstar.com.

Two groups of Morningstar subscribers, he says, were asked to allocate their retirement savings among eight different funds – one group was offered only four lines for choices, although there was a link if they wanted to add more. The other group was offered eight lines.

The results were dramatically different for the two groups, writes Benartzi. “While only 10 percent of people shown four lines selected more than four funds, that number quadrupled among subjects given eight lines.”

That means, he adds, that diversification was driven more by the way the site was designed than by participant consideration.

The report went so far as to say that website design could be as important to retirement security as the success of one's investments — that the decisions made about retirement plans are made online, often quickly, and design can influence them, perhaps, for better or for worse. Everything from negotiating the setup screens (password, login ID) to which rate at which to save can present challenges that website design can make easier or more difficult for participants.

And even the decision about whether or not to withdraw funds can be influenced by the website—and screen—design.

Not optimizing a retirement website, the paper adds, “is itself a choice. It's just probably not a good one.” And there are legal liability issues, since dissatisfied plan participants are more likely to resort to legal action against plan fiduciaries.

5 retirement preparedness numbers for employers

6 companies with the very best retirement plans

Instant Insights /

Digital design plays huge role in retirement choices

More From HR Executive

Related Stories

Recommended For You