Best Practices for Retirement Income Planning Tools

Recordkeepers can learn from best practices for retirement income planning tools to help participants understand their retirement readiness. And firms are increasingly relying on such tools.

The results of Corporate Insight’s recent DC plan participant survey show that participants are embracing this trend. We asked respondents about the activities they had performed on their participant websites in the past 12 months. Viewing retirement readiness information or income projections was the sixth-most common activity reported (19%). We also asked about the importance of various site features, and 66% stated the ability to see how much income they were projected to have each month or year in retirement was “very important” or “extremely important.”

Clearly, these tools are a key part of the participant digital experience. A recent report on best practices for retirement income planning tools analyzes the retirement income projection tools available on firms’ participant sites.

Importing participant data into income planning tools is convenient and ensures result accuracy. But recordkeepers should also allow participants to personalize their results by offering additional inputs and account aggregation features—which less than half of firms in this report do. Firms should also offer calculators, worksheets and contextual information to help participants accurately complete inputs. These features are available to varying degrees within all tools. Tools that offer certain retirement readiness metrics, like annual and monthly figures (18%), peer comparisons (12%) and data visualizations, help participants contextualize results. Leading tools also offer actionable advice and allow changes directly from the tool to help participants proactively improve their retirement readiness.

Income projection tool trends

Since we last reported on this topic in October 2018, multiple firms have introduced new retirement income projection tools and enhanced existing ones. Two firms—John Hancock and Vanguard—added new tools that focus on retirement income planning. In the past two years, four firms have invested in their existing income projection tools’ designs. Relatedly, John Hancock’s and Vanguard’s tools both feature much more modern interfaces than their predecessors. AIG Retirement Services, Charles Schwab, Empower Retirement and Merrill all updated the look and feel of tools and the way tools organize inputs and results.

Revealing further trends, two firms added account aggregation to tools, two firms added risk-tolerance-related inputs, and two added dynamically updating employer match information, which appears as participants adjust their contribution information.

Best practices for retirement income planning tools

The report extends the following recommendations for retirement income planning tool inputs:

• Automatically import participant data but allow participants to adjust it
• Offer optional detailed inputs to help participants generate a holistic, tailored financial picture
• Allow participants to enter information in ways that make sense to them
• Incorporate calculators, worksheets and contextual help to help participants provide accurate data

And the following best practices emerged regarding retirement income planning tool results:

• Offer multiple retirement readiness metrics to accommodate the different ways people conceptualize their finances
• Provide peer comparisons to contextualize retirement readiness metrics
• Offer decumulation analysis to help participants develop retirement withdrawal strategies
• Supplement metrics with data visualizations
• Provide dynamic modeling capabilities and advice that participants can access from tools’ interfaces

Subscribers can read the full report on best practices for retirement income planning tools on our client portal. For access, or for more competitive intelligence on the user experience that recordkeepers provide participants, check out Corporate Insight’s Retirement Plan Monitor research service offerings.