Retirement Readiness Peer Comparisons: Best Practices and Recent Innovations

by on Oct 11, 2017

Sufficiently preparing for retirement can be a daunting task for many participants, but properly gauging retirement readiness can be equally arduous. Peer comparison features provide an intuitive way to help participants understand their progress toward achieving their retirement income goals, offering valuable context to data that may otherwise be less meaningful to participants. Peer comparisons can also play off competitive instincts that may encourage participants to save more. These features typically compare metrics such as retirement income projections, salary deferral rates or account balances to a peer group. This month, Charles Schwab introduced an impressive peer comparison feature to its participant site, and is now the fourth firm in the Retirement Plan Monitor coverage group firm to offer such a resource.   

Firms take a variety of approaches when it comes to peer comparison features, but one of the most notable differences across firms is whether they compare participants to their demographically similar peer groups, or to their “on-track” or “top peers.” We encourage firms to use these more competitive peer groups, as comparing participants to demographically similar groups can give them a false sense of security, while comparing them to competitive peer groups more accurately conveys whether they are falling behind and need to make changes to their portfolios.

Charles Schwab now provides a robust peer comparison feature directly on its participant site homepage, adjacent to a retirement income projection tool—something we consider a best practice in terms of resource positioning. The peer comparison feature lists participants’ income replacement, account balance and savings rate percentiles with a corresponding donut chart and notes the number of peers used in the comparisons.

Homepage My Retirement Progress Section

Participants can expand the peer comparison feature view to view more detailed data accompanied by a series of useful infographics that help participants better understand the provided metrics. The expanded view includes a Your Peer Group tab, comparing participants’ and their peers’ ages and salaries with a color-coded map of the U.S. depicting the number of peers in each region. Its Your Ranking vs. Peers tab displays the homepage peer comparison and an infographic that represents participants’ income replacement percentiles. A National Comparison tab offers a color-coded map of the U.S. depicting the percentile by state and lists participants’ ranking in the selected state; a dropdown allows users to view the data for balances, income replacement percentages or savings rates. The Industry Comparison tab compares participants medium savings rate, balance and income replacement percentages to participants across major industries.

National Comparison and Your Ranking vs. Peers Tabs

Over the past two years, we have seen significant growth in the quality of retirement readiness educational resources, tools and calculators available on RPM firms’ participant sites. In particular, firms have focused on providing resources that are more intuitive and personal and more likely to encourage participants to make changes to their retirement planning strategies when appropriate and the rise of robust peer comparison features embodies this trend.