A recently published white paper from Dream Forward Solutions, a retirement plan provider specializing in AI, asserts that the average American lacks the necessary knowledge to engage with their retirement plan effectively. In three parts, the firm breaks down data it gathered from its proprietary chatbot, considers how to address the obstacles to saving more and proposes remedies for issues the chatbot has identified.
Based on the questions most frequently typed into the chatbot, the firm deduced the most common concerns and areas of confusion among participants. The most commonly asked questions related to five general themes:
- Retirement benefits
- How retirement accounts work
- Tax implications
- Balancing multiple financial priorities
- Investing-related queries
Participants’ top concerns included medical expenses, college costs, not making enough money, feeling financially insecure and prioritizing a home purchase, while the topics participants found most confusing were taxes, investing concepts, withdrawal options, matching and profit-sharing terms and retirement account rollovers. Meanwhile, in Corporate Insight’s recent financial wellness study, A Roadmap of the Financial Wellness Ecosystem, survey respondents identified their top five most concerning financial matters as health insurance, healthcare costs, budgeting, emergency savings and saving early enough—all consistent with Dream Forward’s results.
To address common participant concerns, Dream Forward cites its AI chatbot as a solution, asserting a strong need for conversational engagement regarding financial matters. Similarly, our study revealed that financial wellness programs improve participant engagement with defined contribution plans, and enrollment in such programs better prepares participants for retirement. Regardless of the medium, providers must engage participants effectively—when information is presented in a clear and compelling manner, engagement with plans proves positive, but participants who receive poor-quality communications can disengage from their plans entirely.
Based on our research, we agree that engaging retirement participants in their plans will yield the highest participation, but how to structure that engagement is still up for debate. Dream Forward touts its AI chatbot as a way to converse with participants about their financial and retirement woes, but the firm acknowledges a need for broader structural change in the retirement space. From the data Dream Forward gathered, it identified three potential areas of focus for new policy and industry changes:
- Streamlining rollovers
- Simplifying 401(k) rules and regulations
- Modernizing the retirement space technologically
It is no secret that most Americans do not understand the financial jargon used within the retirement industry. Dream Forward rightfully points out that 401(k)s are complicated by nature, given they are named for an obscure section of the 1978 Revenue Act. Regardless of whether legal or digital remedies—or both—crop up in the near future, firms should work to engage participants from the first time they enroll and log in, rather than allowing unnecessary jargon and complexity to alienate them.