OREANDA-NEWS. August 03, 2015. In a recent survey of American workers, a large majority were found to be saving for retirement—but not nearly as many felt very confident about having enough money to last them through their golden years. While defined contribution (DC) plan participants may not be as doubtful about their retirement prospects as Americans not covered by such plans, plan sponsors nonetheless have a number of Vanguard tools available to help boost their participants' retirement confidence.

The Employee Benefits Research Institute (EBRI) outlined earlier this spring the findings of its 2015 annual Retirement Confidence Survey. The survey found in part that nearly 8 in 10 full-time workers say that they or their spouse have saved for retirement. However, retirement confidence, while on the rise, is still low:

  • 22% of workers are very confident about having enough money for a comfortable retirement (up from 13% in 2013 and 18% in 2014), while 36% are somewhat confident.
  • Retiree confidence in having a financially secure retirement also increased, with 37% very confident (up from 18% in 2013 and 28% in 2014).

Different age groups may naturally have varying degrees of confidence, based on their stages of planning for retirement. Vanguard's tools have the potential to help all generations of plan participants gain confidence in their retirement prospects. Whether the participant is a baby boomer (born 1946–1964) in or nearing retirement, Gen X (born 1965–1980) in midcareer mode, or a millennial (born 1981–2000) recently entering the workforce, the Vanguard Participant Experience team crafts and delivers messages designed to help employees achieve a more secure retirement.

Baby boomers

For the post-World War II generation, it’s important that they boost their savings, understand retirement income tools that can help them prepare and feel confident about their impending retirement, and take advantage of catch-up contributions. (The annual limit for participants age 50 and older rose to \\$6,000 in 2015, up from \\$5,500 in 2014.)

"Boomers are highly engaged," said Rebecca Katz, principal and head of Vanguard Participant Strategy and Development. "When you reach your early 50s, you get serious about retirement. We have a lot of tools that can help you better understand how prepared you are. And when we work with plan sponsors and participants, we highlight the resources that specifically apply to pre-retirees—because we know we have their attention, and we know they are concerned about their retirement."

Vanguard tools cited by Ms. Katz as particularly helpful for baby boomers include:

  • Retirement Income Center. This retirement income “headquarters” features tools and tips on topics such as withdrawing from a retirement plan without running out of money, creating income in retirement, achieving a sustainable retirement spending plan, and understanding the tax implications when making withdrawals.
  • Retirement Income Modeler. This interactive tool uses a participant's age and plan balance to help determine a personalized, sustainable monthly withdrawal strategy.
  • Meetings and webinars. Using the latest principles of adult learning theory and behavioral finance, Vanguard retirement meetings have become increasingly targeted, modern, and action-oriented, with participants receiving simple, straightforward steps to manage their finances and plan accounts.

Recently, new meetings were developed specifically for pre-retirees. One new meeting that's been very popular with sponsors is called "Timeline to Retirement." This meeting walks participants through each step they need to take as they enter retirement (claiming Social Security, entering the Medicaid system, etc).

"Historically, it can be very difficult to get people into a room for meetings until they're highly engaged—and baby boomers are highly engaged because they're so close to retirement," Ms. Katz said. "Boomers come with many questions, and they get answers via face-to-face interaction. Our meetings have proven to be very effective not just for baby boomers, but for all highly engaged employees."

Gen X

For Generation X, Ms. Katz said that maximizing retirement savings is of utmost significance. Investment and asset allocation decisions are important, she said, but for Gen X the focus is on increasing deferral rates so participants at least get the full company match—and, ideally, reach Vanguard's recommended retirement savings rate of 12% to 15%.

Vanguard's online savings nudges are an online "easy button" that make it simple for participants to take action. The nudges provide specific, personalized guidance on how much participants should save to maximize their critical earning years. And nudges can be extremely effective for Gen Y as well—because saving early can be an important first step toward a more secure retirement.

Behavior-based email campaigns are segmented; they break out populations between, for example, high savers and low savers—who'll each receive different communications in an effort to get targeted, actionable savings messages to the right audience. The emails drive participants to the vanguard.com website to take action.

"The nudges are on our website and they're also mobile, with responsive design. Eighty-two percent of participants have mobile phones, and we know that's the way they want to be reached," Ms. Katz said. "As far as behavior-based email campaigns are concerned, we test the response and follow up with a congratulatory email if the participant took action; if they didn't, we'll try a different type of message. For both the nudges and the email campaigns, the feedback is immediate and the campaigns are more effective."

Millennials (Gen Y)

There are many distractions for millennials, and smartphones may be foremost among them. According to research,* people on average check their phones 150 times a day, send 35 texts a day, and spend about 2.5 hours a day looking at email. As a result, Vanguard decided to leverage millennials' love affair with smartphones: Face-to-face meetings, as well as webinars, have been specially formatted for younger investors—redesigned to get them in their plan and meet their match. Meetings also introduce participants to the Vanguard app and mobile experience—so they can self-provision on getting educated and in making changes to their savings and investment allocation going forward.

Previously, face-to-face meetings had a presenter showing slides about plan-participation benefits, with the hope that employees would return to their desks and enroll in the plan. Now, meetings with millennials culminate with the presenter taking out a smartphone and showing how simple it is to enroll in the plan—and then asking them to enroll on their mobile device. With Vanguard's Enroll Now™ feature, employees can enroll in the plan at the default savings rate, increase their savings annually with autoescalation, and select the plan default investment—all in just one click.

Face-to-face meetings are just one example of customizing the messaging for millennials. To cut through the noise and reach millennials with a savings message, Vanguard works with sponsors to experiment with many different approaches.

"We do A/B testing of email campaigns and education on vanguard.com to make sure we're delivering messages that resonate with all participants—boomers, Gen X, and Gen Y," Ms. Katz said. "Soon we'll have technology in place that will examine two different versions of a message—a web article, for example—and as soon as one message starts outperforming, the other message is automatically removed. This will enable us to do a lot of on-the-fly experimentation and get the most effective articles, tools, and nudges up on our website—and on mobile phones as well."

Increased confidence

Will all this lead to increased confidence toward retirement among baby boomers, Gen X, and millennials? That's hard to say. "Retirement planning can be overwhelming at times, and people are busier than ever," Ms. Katz said. "But by giving participants straightforward steps for managing their finances and plan accounts, and by offering personalized experiences that simplify complex concepts and help drive positive outcomes, we believe sponsors can help all generations of participants increase their confidence in a more secure retirement."

*Sources: Internet trends, Kleiner, Perkins, Caufield and Byers, 2013.
Mobile media application spending forecast, Forrester Research, 2012 to 2017.
The social economy: Unlocking value and productivity through social technologies, McKinsey Global Institute, 2012.

Note:

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