As a general rule of thumb, people like having more control over their money. In terms of retirement planning, people like being able to balance their future savings with their present needs, particularly during times of economic volatility. Our retirement plan surveys consistently find (subscription required) that participants highly value the ability to modify their contribution rate, and like doing so often. This makes the design of a retirement contribution tool particularly important for retirement plan websites—any capability that users like and use often is important.
Retirement plan firms can help users find this important feature by placing it on the homepage or in a dashboard. Putting contribution rates in these high-visibility areas makes users’ lives easier—they don’t have to hunt around the site for it—and encourages positive retirement planning behaviors. This is particularly true when these capabilities model the effects of contribution changes on retirement readiness and take-home pay. Although all firms offer dedicated transactional interfaces as well, the visibility of homepage or dashboard tools provide increased convenience, which in turn should lead to greater retirement preparedness.
Below, we’ll examine some best practices that CI’s researchers have identified when it comes to the design of a retirement contribution tool.
Firms should integrate transactional interfaces into homepage/dashboard modeling tools
Firms can help users by providing transactional capabilities on the homepage or dashboard modeling tools. 72% of respondents on our most recent participant survey (subscription required) said the ability to change their contribution rate is “very” or “extremely” important. Given the value participants place on contribution management, firms should ensure these interfaces are easily findable. Ensuring these interfaces also help participants put themselves on track for retirement is of particular importance, especially considering many 401k participants are not contributing enough to reach their retirement goals.
Our recent UX study, which evaluated eight respondents’ interactions with contribution rate modeling tools, found that respondents generally felt underprepared for retirement. However, most respondents in the study valued modeling tools on homepages and understood how to manipulate them, suggesting they’re useful even when respondents feel otherwise underprepared.
In addition to dynamic modeling, homepage and dashboard tools should facilitate changes directly from the interface, allowing users to implement their modeled changes. Tools that link to dedicated contribution rate interfaces are slower and less effective, as they require participants to go through a multitude of steps.
Charles Schwab and T. Rowe Price boast especially robust homepage income modeling tools, but do not allow participants to complete changes through the tool or have them carry over to dedicated interfaces, which may frustrate some users.
Homepage modeling tools often include convenient preset options to help adjust rates. Examples include:
- T. Rowe Price’s homepage features a Contributions section that lists the participant’s current rate and provides steppers to increase or decrease rates by one percent. Uniquely, the firm includes Get Full Employer Match and Beat The Average options that autofill the contribution rate to meet those requirements. A green checkmark appears when participants are getting their full employer match. A semi-circle visualization benchmarks participants against the target savings rate and informs them if their contribution is fair, good or great.
- CUNA Mutual’s homepage retirement income projection tool features a Put Me On Target option that launches the dedicated salary deferral interface and auto-fills rates. The homepage tool includes a RetireOnTarget section that allows participants to model a new salary deferral rate via sliders. A large red warning message appears if a participant is not on target.
Value of dynamic updating capabilities in retirement contribution tool design
Beyond offering homepage or dashboard interfaces with contribution rate changes, firms should also offer tools that dynamically update retirement readiness and take-home pay data to reflect rate changes.
Dynamic modeling provides the context users need to enact transactions confidently. Blindly changing contribution rates without fully understanding the impact on retirement income can contribute to misinformed, and potentially harmful, decisions.
To ensure information is accurate, firms can let participants update key information directly from transactional interfaces. Few provide this, however, with less than a third of firms allowing participants to adjust salaries and less than a quarter allowing them to change their pay frequencies. The option to change salary related information on homepages, in particular, is rare and its absence may hinder participants ability to make sure their retirement readiness information is accurate.
Two firms—Principal and John Hancock—integrate transactional capabilities within dynamically updating retirement income projection and homepage modeling tools and thus can provide thorough retirement readiness information for participants.
Principal’s Retirement Wellness Planner tool dynamically updates and displays a participant’s Retirement Wellness Score, projected monthly income, goal amount and gap analysis.
John Hancock’s My Retirement Action Plan tool allows participants to model a What If contribution rate while dynamically updating the Take-Home Pay Impact section. In addition to the metrics displayed in this section, the tool also estimates the percentage of expenses covered by the participant’s current and modeled rates.
Importance of financial wellness resources
While providing dynamic modeling tools on homepages or dashboards can help employees make well-informed retirement decisions, firms should aim to provide additional resources to help participants with these decisions.
As the salary deferral decisions participants make now can have a long-lasting impact on retirement readiness, educational resources can help participants make the best decisions for their current and future financial situations. Firms should continue to emphasize education around contribution rate transactions.
Vanguard, for instance, recently launched a Financial Wellness Page and includes some education around those transactions, such as in the article How Much Does an Employer Match Help?
Between offering an easily findable, dynamically updating contribution rate transactional interface and providing ample educational resources, firms can ensure participants have the tools necessary to make well-informed salary deferral decisions.
Subscribers can read the full report on best practices for contribution rate transactions on our client portal. Learn more here about CI’s research services for plan sponsors, plan participants and workplace finance programs. Or contact us to learn what our research can do for your organization.