Three Best Practices to Help Boost Retirement Readiness

As a plan sponsor, it’s easy to get wrapped up in the mechanics of running your plan—from monitoring performance and transactions, to keeping your plan compliant with Department of Labor (DOL) and ERISA regulations.

While these day-to-day activities demand attention, you can’t lose sight of your primary fiduciary responsibility—managing the retirement plan with the best interests of participants in mind.

What’s makes this responsibility particularly important is that for most participants their retirement plan account will be the primary vehicle for funding their future living expenses. A fair number of participants view their workplace retirement plan account as their only savings option.

A March 2015 study issued by the National Institute on Retirement Security found that 66% of working families fall short of conservative retirement savings targets. Many of those who are behind often don’t realize how unprepared they are, until it’s too late.

You are in the best position to promote retirement readiness among your plan’s participants. The challenges they face these days are different from the challenges current retirees faced in preparing for retirement—from the decline of pensions, to the uncertainty of Social Security, to the necessity of health care costs in retirement.

I recommend three best practices to plan sponsors looking to help their participants improve retirement readiness. These recommendations seem obvious, but they can be easily forgotten in the daily management of your plan fiduciary duties.

Provide a good plan.
Make it easy for all employees to sign up and participate in your plan by including auto-enrollment features. Automating contribution increases can also help participants by lowering the behavioral hurdles that prevent people from saving more.

Plus, the investment options you include in your plan’s menu have a significant impact on improving the likelihood of success. A well-rounded lineup of low-cost funds promotes portfolio diversification. Offering target date and asset allocation options simplifies the investment selection process for participants.

Communicate often.
People like to choose where they get the information they need to make decisions and stay in the loop. So plan to use different avenues of communication to connect with participants and engage with them effectively.

Especially in this digitally oriented age, many people prefer to get information visually with graphics or videos. These can be more expensive to produce, but if you mix in these visual tactics with your traditional written communications, you can offer participants a variety of options to choose depending on how they prefer to receive information.

Promote financial education.
This is an area I encourage plan sponsors to rethink. There’s a tendency to treat any education like schoolwork. But adults approach learning differently than children. For adults, learning needs to be voluntary. They have other responsibilities in their lives to manage, so they must make a commitment to education and learning in order to become fully engaged with the program.

Also, be cognizant of different life events people have experienced. These events have often shaped their attitudes about money, saving and investing. General financial education may go over the heads of many participants. They are likely less interested in concepts and theories, and will be more receptive to learning how the financial and investment choices they make will affect their lives, both today and in the future.

The path to retirement readiness.
Participants own their retirement plan accounts and bear the responsibility for managing them in an appropriate way for their goals and risk tolerance. But as a plan sponsor you can help them make the most of the benefits you provide.

Plan design, communication and education from you can help participants improve their retirement readiness and help fulfill your duties as a retirement plan fiduciary.