PLANSPONSOR - October-November 2022 - 10

UPFRONT
Engage
Participants
With the
Future
RETIREMENT plan research shows that
making enrollment automatic is crucial
to plan participation. Yet, current behavioral-science
research suggests that, even
with this plan feature in use, considerable
improvement is needed to ensure retirement
readiness.
The Big Disconnect
" The problem is, people are disconnected
from their future selves and they tend
to hyperbolically discount the future, "
says Punam Keller, Ph.D., of the Center
for Business, Government and Society
at Dartmouth's Tuck School of Business.
" That creates a number of problems when
we're thinking about financial planning, "
she says. " People tend to focus on the
financial issues right in front of them and
put off saving, as we know. But also, the
user experience within financial services
and retirement is not great from a behavioral
science perspective. People are
flooded with information and questions
that lack any tangible context. "
Examples of this range from basic
investment risk questionnaires to the
more in-depth questions financial
advisers tend to ask about big goals such
as retirement. " When we look at how
these questions are presented, it really
goes against everything we know about
good survey design or effective information
gathering, " Keller says. " Most people
don't know what they want to do in retirement,
so it makes no sense to ask this.
We're asking people to value their net
worth and their risk tolerance, and we
aren't giving them any context about how
to do it or what it means, and those are the
first questions on the list. So people panic
and turn off immediately. "
Based on her research into how
people respond to questionnaires and
other types of information gathering, if a
question is difficult and big stakes seem
to be attached, the individual is apt to put
off answering for as long as possible. This
means people become proactive about
retirement preparedness very close to
their retirement date, which limits their
options and ability to course-correct.
There
are
generational
issues,
too. Asking Millennials or members of
Generation Z about their financial goals
will likely elicit ironic laughter. Both
generations face pressing demands on
their money such as to pay off student
debt, which, according to the Center for
Retirement Research at Boston College,
looms large as a priority over saving for
10 PLANSPONSOR.COM October - November 2022 Art by Claudi Kessels
retirement. Consequently, this limits the
growth of retirement assets.
Other financial milestones-homeownership
for one-that could help build
wealth are mostly out of reach for these
generations, which puts more pressure on
retirement contributions to cover the gaps.
Relevant financial information and advice
could especially help these generations as
they look for solutions, but, experts say, the
information would have to be put within a
broad context to engage them.
Call to Action
David John, senior policy adviser for the
AARP Public Policy Institute, notes that
recent innovations such as financial wellness
programs can help engage plan
participants early on.
" What we've seen from the really
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