That was the sense of one reader’s response to this week’s reader poll on the most impactful retirement savings innovations.
There are so many things that have made it easier for Americans to save for retirement — and for advisors to help Americans save for retirement — but what are the most impactful innovations? The top-ranked innovation by respondents to this week’s reader poll was automatic enrollment (the version sanctioned by the Pension Protection Act), just outpacing retirement income estimates on participant statements.
However, the reader whose comments began this post cautioned that, “Giving participants their retirement projections was touted as a way to make an impact. However, participants really need ‘auto’ because they really need someone to do it for them. Instead of all this fiduciary focus and making life more difficult for participants anything we design or create going forward needs to address ‘do it for me,’ ‘make it fun’ and ‘make it easy to access’ is where our focus needs to be... that message needs to be made clear to the IRS and the DOL.”
Ranked third — and an approach getting a lot of discussion these days — is the concept of reenrollment, or backsweeping, where you automatically enroll every eligible employee every year, even if they opted out previously.
Ranked fourth — and certainly one that has proven to have an impact — is one-on-one personal advice to participants, followed closely by EZ-Enrollment, which is a simplified enrollment process that still involves the participant in the process (unlike automatic enrollment), but by being more streamlined, with fewer options, makes the process less intimidating for participants.
The rest of the top 10 were:
- The Internet (how did we get along before we had it?)
- Target-date funds
- Stretch matches
- Gamification tools to encourage participants to save more
- Roth 401(k)
And while it may not have “sizzled’ on our list, “The safe harbor match helped create a ‘floor’ for contributions and an initial goal for participants; by far, the most appreciated feature by participants,” noted one reader.
“If we put as much or more effort into ‘robo-education’ as we did into ‘robo-investing’ we might make even more strides,” explained one reader. “My clients keep asking for more and more education for their employees, but they want targeted education based on each participant's needs. They’re asking for one-on-one meetings and that becomes very difficult for the larger plans with several hundred participants. We also need robo-education for the many retirement calculators and tools out there. Throwing calculators with gazillions of possible inputs with no interactive help or tutorials just isn't doing the trick.”
Noted another, “Target date funds made it easier for small to mid-balance participants to invest in a diversified portfolios. Fee disclosure makes it easier for plan sponsors to compare new proposals, but I have still found that on older plans (especially group annuities) they are still hiding fees or make them so indecipherable they are worthless. But small businesses are too busy or don't want the hassle of moving, so many of these plans are still staying in place.”
The bottom five options were interesting as well:
- Savers’ Credit
- MyRA
- Education policy statements
- Exchange-traded funds
- Self-directed brokerage accounts
We also asked readers to look ahead 10 years, and guess which would be considered the most impactful retirement savings innovation.
In-plan retirement income options led this list, but not by much. Others among the top five were:
- Robo advisors
- Reenrollment/backsweeping
- Target-date funds
- Custom target-date funds
“Love the idea of auto-enrollment,” commented another reader, “but I think auto-increase has to be a part of that. Without it, folks just keep saving 3% or 4%, which really isn't enough. As part of the set-it-and-forget it mentality, I like target date funds as a default investment rather than some super-conservative fund. This way the hands-off participants do get some diversity and a chance for higher returns early on, and, we hope, reduced chances for large losses as they approach retirement — and they don't have to do anything in the meantime. Because, most likely, they won't.”
One reader suggested interactive targeted participant education — which seems like a solution whose time has come.
Check back in 10 years, and we’ll see how that list holds up. Thanks to everyone who participated in our weekly reader poll!
Got something you’d like to run by NAPA Net readers? Post it in the comments below, or email me at [email protected]. Anonymously, of course.
