This is an evolving article, it was last modified Sep 13, 2021

Workplace retirement digital trends are being shaped by a number of industry factors. As recordkeepers work to meet participants’ and sponsors’ growing expectations, the responsibility for retirement readiness increasingly falls on participants. Many Americans are unaware that they are inadequately prepared for their desired retirement lifestyles and need further guidance. Indeed, recordkeepers and sponsors want (and need) to help employees better understand their retirement preparedness. During this shift of responsibility, recordkeepers can outpace competing firms by constantly improving the participant and sponsor digital experience.

Corporate Insight regularly monitors DC plan participants’ and plan sponsors’ digital experiences and conducts surveys that serve as the foundation for syndicated studies. Our 2019 DC Plan Participant Survey polled over 1,700 participants regarding their preferences and satisfaction with their digital experiences. We conducted a similar employee survey in 2018, allowing us to pinpoint trends and expectations. In the same vein, in 2019 we surveyed over 330 plan sponsors regarding their online experiences on their providers’ sponsor websites.

According to our participant survey, 50% of respondents were “satisfied” with their retirement providers’ sites. Only 32% were “very satisfied” and 14% were “neither satisfied or dissatisfied.” Our 2019 Plan Sponsor Survey produced similar results. Sponsors’ satisfaction with websites is relatively high, but room for improvement remains—31% of respondents said they were “very satisfied” with their website experiences, while 52% were just “satisfied” and 14% were “neither satisfied nor dissatisfied.” Considering the growing importance of participant and sponsor websites, recordkeepers can outpace their competitors by learning from retirement digital trends and improving these experiences. Providing a first-rate experience presents an opportunity for recordkeepers to encourage participant engagement and better prepare participants for their futures.

Participants and sponsors are satisfied with their digital experience, but there is room for improvement
Overall, how satisfied are you with your retirement plan provider’s website?

Retirement plan sponsor and participant satisfaction survey

A retirement readiness gap leaves most Americans inadequately prepared for their futures

Economic changes—Social Security’s uncertain future, defined benefit pension plans disappearing and rising healthcare costs—have increasingly put the burden of saving on participants. Yet most are financially unprepared for their futures and ultimately face inadequate retirement readiness. Currently, the Social Security Administration (SSA) estimates that approximately 21% of married retired couples and 45% of single retirees depend on Social Security for about 90% of their retirement incomes. This is alarming, as the future of Social Security is unclear; the SSA estimates that funds will deplete by 2034. Several factors impact this shortfall:

  • Large Baby Boomer generation moving into retirement
  • Lower birth rates
  • Decreased ratio of workers to beneficiaries
  • Longer life spans

For those born after 1962, the SSA’s new Full Retirement Age is 67. According to our 2018 employee financial wellness survey, the backbone of our syndicated study, A Roadmap of the Financial Wellness Ecosystem, of the 85% of respondents who plan to retire, 29% plan to do so at the age of 65, a plurality of respondents. Only 4% of total respondents indicated that they intend to retire at 67. Studies indicate the emerging need for people—especially women, who live longer but earn less—to work longer and save for longer. Yet the large portion of respondents planning to retire at 65 could signal a gap in retirement communication and perhaps a lack of education.

Private-sector pension plans, once a common retirement income source, are now nearly extinct. Only about 15% of private-sector employees have pensions. Employers feel that pensions are risky business. Committing to pay workers a large sum of money after they retire puts the investment risk on the employer. President of ERISA Annette Guarisco explains, “Because companies are now competing with other companies that don’t offer these benefits to their workers, it becomes a cost they have to question whether they have the ability to maintain.” Instead, most employers are opting for DC plans as they are less expensive, less risky and easier to manage than pension plans.

While pension plans did not require much employee effort, 401(k) plans differ. Employees should engage with their plans and become well-informed on retirement topics to maximize their savings.

Healthcare costs in retirement are rising as inflation for healthcare outpaces general inflation, concerning many participants. According to our 2019 participant survey, 53% of respondents reported that the topic of healthcare—and the cost of healthcare in retirement—is “very important” or “extremely important” to them. In a recent study by Fidelity, the firm estimates that a 65-year old couple retiring in 2019 will likely pay $285,000 in healthcare costs throughout their retirement. This figure doesn’t even include costs outside of Medicare such as dental, vision and long-term care.

Long-term care is necessary for many. According to a study by Lincoln Financial group, more than half of Americans turning 65 will need some form of long-term care during retirement, with the total in need of care expected to more than double by 2050. Many do not consider long-term care costs and frequently overestimate the role that Medicare will play, in turn significantly underestimating their overall healthcare expenses in retirement.

People vastly underestimate the cost of healthcare in retirement and often do not consider the costs of long-term healthcare.

Individuals simply are not saving enough for retirement, compounding the impact of these outside economic forces. About 30% of our 2018 employee survey’s respondents indicated having less than $10,000 saved for retirement. Improving financial literacy helps participants understand their needs in retirement. Our survey also shows that employees do not feel confident in their knowledge of key retirement planning concepts. A plurality of respondents reported they either had no understanding or were a novice regarding proper asset allocation (51%), retirement income (41%) and defined contribution plans (41%).

Indeed, employees need help when it comes to financial education. Yet, many—especially women—do not seek financial help from the optimal sources, like financial professionals. In the same survey, we found that about 35% of respondents reported going to family members for help, while only 19% reported seeing a retirement plan provider—website, call center or relationship manager—for help.

Women seek professional financial advice less often than men despite a lower level of confidence in achieving their retirement goals. A plurality of women (38%) say they are “somewhat confident” about being able to retire comfortably, compared with the plurality of men (36%) who say they are “very confident.”  In spite of this, results show that women reportedly turn to family members the most for financial advice, while men are more likely to seek out financial advisors and professionals. Our survey showed that 40% of women reported going to family members for financial help, compared to 30% of men. Further, only 27% of women sought help from a financial professional, while 37% of men reported the same.

In general, employees are overly confident about retirement. According to our 2019 study, 32% of respondents claim that they are “very confident” in their ability to afford their desired retirement lifestyles. This high confidence rate may reflect employees’ tendency to disregard retirement industry guidelines, simply assuming they can maintain their desired retirement lifestyle. For example, experts recommend total retirement plan contribution rates of at least 10%, yet 31% of our survey’s respondents who indicated they are currently participating in a workplace retirement plan reported contribution rates between 3% and 6%. At a time when responsibility has shifted, employees clearly are inadequately prepared for retirement.

A majority of participants contribute between 3% and 6% to their workplace retirement plans
What percentage of each paycheck do you contribute into your retirement plan?

Recordkeepers and plan sponsors want (and need) to help participants and drive participant engagement

As the retirement industry changes, recordkeepers want to help participants understand their own retirement preparedness and help sponsors understand their employees’ retirement readiness in a more intuitive manner. As such, retirement readiness information and plan health metrics have become more widespread.

Firms are turning to retirement income projection tools as a key resource for communicating retirement readiness data to participants, as 16 of our 18 Retirement Plan Monitor (RPM) coverage set firms provide such a tool. Retirement planners have become more robust and contextual to help participants accurately complete inputs. Most firms in the RPM coverage group integrate tools and calculators, such as a Social Security benefits estimator, budgeting tools, risk tolerance profiles and tax rate calculators. Others offer more actionable, comprehensive guidance:

  • 53% of coverage set firms offer contribution rate suggestions, and 35% provide investment allocation advice. Our November 2020 report on retirement planners discussed how firms can capitalize on the benefits of actionable advice by integrating transactional capabilities into income projection tools. Built-in transactions allow users to act immediately. Alternatively, linking to transactional interfaces—especially interfaces that are not prefilled to reflect modeled scenarios—extends processes and increases the likelihood of user drop-off.
  • Income projection tools that provide decumulation analysis can be effective resources for creating drawdown strategies. Yet, our November 2020 report notes that less than half of income projection tools provide any decumulation-related analysis.

The proliferation of plan health tools is a noteworthy trend in the plan sponsor digital space. In the past, many sponsors relied on complex and time-consuming reporting tools to gather the information necessary to evaluate their plans’ health. Now, plan health tools communicate this information more efficiently and intuitively. When Retirement Plan Monitor – Institutional (RPM-I) launched in 2015, only one firm offered a plan health tool. Today, 13 RPM-I firms (93%) provide this feature.

Voya Plan Health Tool

Our 2019 DC Plan Sponsor survey, which corresponds with Corporate Insight’s recently released RPM-I audit, shows that engagement data and modeling capabilities are of high importance to plan sponsors. With a 71% top-two box importance rating, modeling capabilities ranked second among plan health tool site attributes. However, no RPM-I coverage set firm currently offers this capability.

Engagement data—deemed “very important” or “extremely important” by 68% of survey respondents—is available on 58% of RPM-I firms’ plan health tools. Leading recordkeepers go a step further, providing engagement impact data that sponsors can use to create more effective outreach campaigns and prioritize communications. Only four plan health tools (25%) offer engagement impact behavior. Two—Fidelity and T. Rowe Price—also provide analysis of the effectiveness of different engagement behaviors. T. Rowe Price’s tool features a graph depicting the percentage of participants who increased their deferral rates after engaging (or not) in several activities, including using specific educational content and opening and clicking through emails. The graph also provides an engagement effectiveness rate with trending analysis for each engagement behavior.

Workplace retirement digital trends T. Rowe Price plan health tool engagement impact data
T. Rowe Price Plan Health Tool Engagement Impact Data

The top five plan-health-related attributes involve key metrics and how to improve them
Following are some site attributes related to plan health tools. How important is each listed site attribute to you?

Participants are unprepared for retirement, signaling a lack of education paired with an engagement problem. Recordkeepers can improve engagement by providing education and tools that facilitate the information exchange between sponsors and participants. Evidence exists that sponsors are invested in helping their employees improve their financial circumstances.

Corporate Insight conducted in-depth interviews in 2018 with eight progressive plan sponsors from employers across the country. We found that all sponsors agreed that it is within their responsibilities to, at the very least, attempt to arm their employees with the education needed to allow them to take the appropriate actions to improve their own financial well-being. Beyond that, three sponsors deemed it their personal responsibility to try to improve the financial well-being of their employees. One sponsor remarked, “I absolutely feel that I have an obligation to contribute as much as I can to getting [participants] to a better spot, yes.”

I absolutely feel that I have an obligation to contribute as much as I can to getting [participants] to a better spot, yes.

Recordkeepers are providing more prepackaged and targeted educational campaign materials. This reflects an understanding that education encourages engagement, which in turn can improve retirement outcomes. Unlike one-time educational outreach, engagement campaigns give participants multiple opportunities and ways to involve employees and reinforce messages over time. Campaigns can cover multiple aspects of one topic in a curriculum style, building employees’ foundational knowledge before moving on to more complex issues. Our January 2019 report on plan sponsor site employee engagement resources found that Fidelity, for example, equips sponsors with America Saves Week and Keeping Your NetBenefits Account Secure toolkits. These toolkits include materials like articles, fliers, prefilled emails and checklists that sponsors can disseminate. About half of firms in the RPM-I coverage group offer packaged content for running campaigns, suggesting that more recordkeepers should get on board with the trend.

Recordkeepers provide plan sponsors with employee engagement resources like Fidelity NetBenefits
Fidelity Keeping Your NetBenefits Account Secure Toolkit Resource

Recently, the retirement industry has had to confront the impact of the novel coronavirus and adapt to the recently passed CARES Act. The legislation’s provisions offer financial relief to workplace retirement plan participants:

  • Participants can take a “coronavirus-related distribution” for up to $100,000; the 10% early withdrawal penalty is waived on these withdrawals, and the recipient can spread out the distributions over three years
  • Participants can take a $100,000 401(k) loan; previously, the limit was $50,000
  • The act suspends required minimum distributions this year

In the uncertainty of this time, it is more important than ever to provide as much information and assistance to participants as possible through clear, universally available and consistent messaging. This is especially true as participants may be inclined to access their retirement plan funds and might not understand the options available to them.

Coverage set firms have introduced new dedicated sitelets that house resources, added notices on both sides of the login, promoted new and existing educational materials, and integrated messaging within transactional landing pages or interfaces. Firms also began encouraging digital usage as call volumes increased. Recordkeepers should prioritize notifications, educational resources and guidance on multiple areas of the site to help participants and sponsors alike navigate the changes.

Principal Coronavirus and CARES Act Participant Site Homepage Notification

Takeaways for plan providers based on workplace retirement digital trends

  1. Participants are not saving enough for retirement, a problem compounded by economic changes in the industry.
  2. Participants do not have sufficient financial knowledge and seek help from improper sources.
  3. In spite of being unprepared, participants are overly confident in their ability to achieve their desired retirement lifestyles, signaling that they need more guidance and education on the subject.
  4. Recordkeepers want and need to help participants understand their retirement readiness and provide help.
  5. Retirement readiness data and plan health tools have become increasingly important to understand participants’ strengths and weaknesses.
  6. Recordkeepers are providing targeted educational campaign materials, signifying an understanding that education drives engagement which is key to driving better retirement outcomes.
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