Employers are learning they need to do more to try to educate their workers about retirement.
So says Rebecca Katz, a principal with Vanguard Participant Strategy and Development, noting that the increase in the use of auto features and breakthroughs in web-based technologies have already helped transform retirement education in the workplace and are making it easier for participants to save.
In the past, companies educated their employees sporadically, informing new hires about their defined contribution plan, communicating changes to the plan, such as a new record keeper or new plan options, or helped departing employees with distribution options. But those days are over.
Auto-enrollment and auto-escalation, target-date funds, managed accounts, default options and re-enrollment on the investment side have produced “large-scale behavioral change” in plans adopting these features, Katz said. These changes are happening more quickly than typical education programs have been able to deliver.
Retirement education programs today need to be available when participants are ready to act, so that employers can provide them with the information they need and frame choices for them on demand. This is particularly true for participants in their 40s, 50s, and 60s who are closer to retirement and tend to have larger balances and a greater need for education at critical points in their lives, she added.
The increasing use of auto features in plans and their success in boosting plan enrollment and diversifying portfolios also is shaping how Vanguard and sponsors approach retirement education in plans that don’t offer these features.