Improving Employee Retirement Readiness

Recently, the focus of plan sponsors has shifted from reducing plan costs to ensuring plan participants’ retirement readiness and helping them set accurate retirement goals. As a result, the majority of sponsors are working to improve investment menus and change their plan design. Those, however, are only some parts of the overall picture for improving employee retirement readiness.

What retirees are the least prepared for and need the most help with are understanding how long their money will last in retirement, knowing how much they will need when they retire and preparing for the risks inherent to retirement. Here are four key aspects plan sponsors should consider to help plan participants aptly prepare for retirement.

How to Gauge Retirement Plan Effectiveness

Return on investment. Compound annual growth rate. Market outperformance. Preservation of principal.  Risk adjusted performance. There’s no shortage of metrics available to retirement investors looking to gauge the success of their portfolio. It can be a bit more challenging – and more qualitative – for plan sponsors to gauge their plan’s overall impact on their organization and their participants’ ability to retire.  It’s not easy to get a good sense of whether the 401(k) or 403(b) plan your institution offers stacks up favorably with employee expectations. With that said, however, it’s essential for sponsors to have a good idea of what makes their plan attractive (or not), how to measure it and the overall impact on employee satisfaction. Here’s how to start tracking your retirement plan – and its effect on the bottom line.

Why Plan Participant Education is Essential

Plan sponsors have a responsibility to participants to make retirement plan offerings cost-effective, accessible, easy to understand, and risk managed. Their clearest goal is simple: help to ensure participants are prepared for retirement. Unfortunately, that has proven easier said than done. An alarming body of research by the Employee Benefit Research Institute suggests that many employees are not likely to arrive at retirement age in a secure financial position. Similarly, well over half of all participants in a recent survey failed a basic 401(k) quiz, and an almost equal number reported lack of confidence in their ability to choose investments. These figures are symptoms of a larger issue: financial ignorance. Plan participants often lack a solid understanding of what drives the success of their retirement savings, and increasingly, their unawareness is leaving them unprepared to leave work. Implementing plan participant education is key.

How Plan Sponsors Can Improve 401(k)/403(b) Participant Education Efforts

Two-thirds of American workers are not saving enough to retire comfortably, according to several studies. Most have access to retirement savings plans but fail to take full advantage of them. U.S. Census Bureau researchers announced in 2017 that about 80 percent of Americans have access to an employer-sponsored retirement savings plan. However, only 32 percent of workers participate. This alarming statistic illustrates why improving plan participation and education has become a top priority for plan sponsors.

Rethinking the Digital Experience to Drive Plan Participation

Plan sponsors must keep up with the ever-changing rules and regulations regarding keeping their participants informed. However, increasing participation rates is vital to your retirement plan. Although you may not have given much thought to the way your employees interact with your retirement plan’s web portal, user experience has a significant impact on participant engagement. The good news is that a full-featured, responsive website for your plan likely will engage and excite your employees, and thus promote participation rates. Move forward from archaic paper forms and encourage the use of technology for efficiency and safety to drive plan participation.