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Q: Data from our recent annual plan review suggests that our retirement plan communication and education efforts with our employees need to greatly improve. Any tips on where to start?
A: Communicating retirement planning concepts to plan participants through clear, jargon-free language may be more dependable and effective than using imagery, suggests new research from Capital Group. The language that is selected for retirement communications is critical to prompting participants to engage and take the steps they need to prepare for retirement. Because each person is unique, there really is no “picture” that truly represents retirement for everyone. In fact, asking employees to “imagine retirement” and selecting an image of a senior couple enjoying their grandchildren on a beach (or on a travel adventure) may be considered by many employees to be extremely subjective (not to mention very cliché) — and actually turn them off.
The Capital Group’s, “The art of retirement communications: How well do people today connect with the language and images of retirement?,” suggests best practices for plan sponsors and also highlights imagery and messages to avoid. Alternatively, you can access the report at: https://tinyurl.com/bddwvurn.
Q: Our plan committee, with the help of our plan advisor, is considering reducing the number of investment options available to our employees. We currently have 27 investment options — how does that compare with industry averages?
A: You are not alone in having a lot of choices available. The 65th Annual Plan Sponsor Council of America’s Survey of Profit-Sharing and 401(k) Plans found that more than a quarter of plan sponsors offer more than 26 options, whereas another 18% offered 21-25, and 27% offered 16-20. A long-held principle of behavioral finance is that more choice doesn’t always lead to better decisions. As such, it’s probably a good idea that you are reviewing your investment menu and considering reducing the options. Are there funds on the current menu that either aren’t being used or aren’t being used widely? You may find that they are contributing very little other than information overload for your employees. Not to mention adding more pages to cover in your investment reviews.
Q: Our company has been growing rapidly over the past two years, creating many current and near-future ground floor opportunities for younger, less-experienced workers. In discussing the benefits of our retirement plan, what do we need to know about the attitudes and views these younger workers have about saving for retirement?
A: Data from Northwestern Mutual's “Planning & Progress Study 2022” reveals that Americans between the ages of 18 and 25 — known as Generation Z — are taking significant steps to improve their financial well-being with the goal of retiring at age 59; years ahead of the generations that preceded them. They also were the most likely to build savings during the pandemic and begin working with an advisor. However, while they prioritize an early retirement, money is not what drives most of them at work. Nearly two-thirds (64%) said personal fulfillment is more important in a career than money (36%). You can also access the study at https://tinyurl.com/3r8zpw3c.
Capital Group. (2022, August). Wisdom of Experience Investor Survey Series. The Art of Retirement Communications (capitalgroup.com)
Northwestern Mutual. (2022). Planning and Progress Study. Newsroom | Northwestern Mutual - Planning & Progress Study 2022
Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com
©2023 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.
Pensionmark Financial Group, LLC (“Pensionmark”) is an investment adviser registered under the Investment Advisers Act of 1940. Pensionmark is affiliated through common ownership with Pensionmark Securities, LLC (member SIPC).