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Using Education Tactics to Help Boost Retirement Savings

3 ways to make your message resonate with participants

David Blanchett, Morningstar Investment Management LLC


What forms of education help participants increase retirement savings? At a basic level, education entails going beyond the standard investment menu to highlight the resources and tools that can help craft investment and savings recommendations. It’s important to focus on the tactics that will resonate with your plan’s participants.

Here are 3 ways to help educate participants:

  1. Make your retirement savings material easy to read. Participant communications are often overly complex. These materials typically try explain in great detail how each aspect of the plan works in order to satisfy legal requirements. Participants don’t always read these materials. (How many even review their quarterly statements?) So, the communications sent to participants should be simple and focused on what could help create better outcomes. For example, participants may be much better served receiving a one-page mailer about how to save for retirement or what their optimal savings rate could be, rather than a five-page document outlining the formula for determining the monthly crediting rate for their stable-value fund.
  2. Focus on good financial habits. For some participants, getting a handle on paying off high-interest credit cards and student loans may be a more important goal than stashing money away for retirement. The interest rates on credit cards can sometimes exceed 20%, which is a much higher “return” than one can be reasonably expected to earn through investing in stocks or bonds. Furthermore, integrating financial wellness programs into the retirement equation can help provide a more holistic solution than is usually the norm today. These programs can help participants understand the value of good financial habits as the foundation of retirement savings. Education on simple, yet powerful, concepts like spending less than one earns and saving for emergencies can be invaluable.
  3. Sync up with plan design. Education can also go hand in hand with plan design to help employees understand plan features and limitations. An example of this is with provisions designed to limit plan leakage. This is an important issue for plan sponsors and participants. While hardship distributions and loans can provide a valuable source of liquidity for some employees, they can also pose definite risks to retirement savings. There has been new research on this topic over the past few years, with the primary focus on stopping participant leakage through intelligent plan design by limiting provisions such as loans and hardships. The Defined Contribution Institutional Investment Association has an insightful research paper that addresses the impact of leakage and possible solutions.

Leveraging education is a simple step that employers can take to help participants navigate the complexities of planning for the future and potentially boost retirement savings.

Please see below for an important disclosure.

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Important Disclosure

Morningstar Investment Management LLC is a registered investment adviser and subsidiary of Morningstar, Inc. The Morningstar name and logo are registered marks of Morningstar, Inc. Opinions expressed are as of the date indicated; such opinions are subject to change without notice. Morningstar Investment Management and its affiliates shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses or opinions or their use. This commentary is for informational purposes only. The information data, analyses, and opinions presented herein do not constitute investment advice, are provided solely for informational purposes and therefore are not an offer to buy or sell a security. Before making any investment decision, please consider consulting a financial or tax professional regarding your unique situation.

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