Q: Data from our recent annual plan review suggests that our retirement plan communication and education efforts with our employees need to greatly improve. Any tips on where to start?
A: Communicating retirement planning concepts to plan participants through clear, jargon-free language may be more dependable and effective than using imagery, suggests new research from Capital Group. The language that is selected for retirement communications is critical to prompting participants to engage and take the steps they need to prepare for retirement. Because each person is unique, there really is no “picture” that truly represents retirement for everyone. In fact, asking employees to “imagine retirement” and selecting an image of a senior couple enjoying their grandchildren on a beach (or on a travel adventure) may be considered by many employees to be extremely subjective (not to mention very cliché) — and actually turn them off. The Capital Group’s, “The art of retirement communications: How well do people today connect with the language and images of retirement?,” suggests best practices for plan sponsors and also highlights imagery and messages to avoid.
Q: Our plan committee, with the help of our plan advisor, is considering reducing the number of investment options available to our employees. We currently have 27 investment options — how does that compare with industry averages?
A: You are not alone in having a lot of choices available. The 65th Annual Plan Sponsor Council of America’s Survey of Profit-Sharing and 401(k) Plans found that more than a quarter of plan sponsors offer more than 26 options, whereas another 18% offered 21-25, and 27% offered 16-20. A long-held principle of behavioral finance is that more choice doesn’t always lead to better decisions. As such, it’s probably a good idea that you are reviewing your investment menu and considering reducing the options. Are there funds on the current menu that either aren’t being used or aren’t being used widely? You may find that they are contributing very little other than information overload for your employees. Not to mention adding more pages to cover in your investment reviews.
Q: Our company has been growing rapidly over the past two years, creating many current and near-future ground floor opportunities for younger, less-experienced workers. In discussing the benefits of our retirement plan, what do we need to know about the attitudes and views these younger workers have about saving for retirement?
A: Data from Northwestern Mutual's “Planning & Progress Study 2022” reveals that Americans between the ages of 18 and 25 — known as Generation Z — are taking significant steps to improve their financial well-being with the goal of retiring at age 59; years ahead of the generations that preceded them. They also were the most likely to build savings during the pandemic and begin working with an advisor. However, while they prioritize an early retirement, money is not what drives most of them at work. Nearly two-thirds (64%) said personal fulfillment is more important in a career than money (36%).
At Diversified Financial Advisors, we believe with the right plan design, we can create successful retirement outcomes for your business and employees.
We are happy to help, if you have any questions or would like additional insight, please feel free to reach out to me at joe@diversifiedfa.com or 800.307.0376.
Disclosure: This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. Investment Advice and 3(38) Investment Fiduciary services offered through Diversified Financial Advisors, LLC, a Registered Investment Advisor. 3(16) Administrative Fiduciary Services provided by PISTL Service Corporation. Discretionary Trustee services provided by Printing Industries 401k Trustees. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.