One of the most frequently lamented challenges of working with participants is the lack of financial education, and resulting gaps in financial literacy. This week, we asked NAPA-Net readers what they’re seeing – and doing – to help close those gaps.
Most (59%) of this week’s respondents conduct participant education sessions, and another 23% said that while they don’t, others in their firm(s) do. Nearly 1 in 10 said they “sometimes” did those, and the rest – didn’t.
For most respondents that status hadn’t changed in the past two years, though half (50%) said it was because they continued to do that education, and about a quarter (23%) indicated it was because they (still) weren’t doing so. Another 22% said that things hadn’t really changed for them, but that the focus had changed - more financial wellness/outcomes than traditional participant education. The rest said that while they had done participant education, they now hired others to do so.
“We still do participant education and do whatever we can to get ongoing communications out; but wish we had more support from our plan sponsors to push those communications out to plan participants,” noted one reader. “Participant education must be a top down approach and plan sponsors must be engaged and be ambassadors for their plan participants. It is a commitment; but if we are going to have an impact on retirement readiness; we all have to do our part.”
Another explained, “We provide a quarterly newsletter, monthly communications on relevant retirement and financial wellness topics and special edition pieces based on what is happening that may impact plan participants.”
“Approximately 1 month after open enrollment for general benefits elections, we remind participants to consider how their new elections may impact retirement savings,” noted another reader.
“Our participant education is very structured in terms of outbound material and timing of delivery,” explained another.
Frequencies
We also asked about the frequency of in-person education (more than one answer applied, since the frequencies were different, depending on client/participant needs):
50% - annually
50% - on demand
32% - semiannually
13% - quarterly
9% - monthly
“This is based on client size and employee demographics,” explained one reader. “We are always available to address participant questions whenever they should need us and will customize webinars to meet client needs.”
“Some are scheduled, regimented,” noted another. “Others are as needed, especially dependent on the size of the client (ppt count) and what the recordkeeper provides.”
‘Special’ Occasions
Noting that there are a number of events during the year that highlight the importance of saving, we asked readers which they (or their partners or plan sponsor clients) leverage in their communication efforts:
55% - National 401(k)/403(b) Day
45% - America Saves Week
9% - National Retirement Security Week
7% - National Retirement Planning Week
“As many as we remember, mostly through social media. And of course, whatever the recordkeepers have planned,” noted one reader.
“None,” explained another. “It is done annually at the same time of year that has nothing to do with the above.”
Asked why they didn’t leverage the events, a third noted that the “timing didn’t match with our efforts,” and half that many said they “weren’t sure how to leverage it” in their efforts. Another 10% split between noting that the messaging of the campaigns didn’t match their efforts – and the timing didn’t align with their efforts.
However, the most common reason cited – by 61% - was that they didn’t know about the event(s).
Lesson ‘Plans’
On the subject of education, I also asked readers if there was one thing you could teach workers about finance that would help them be better educated about such things. Here’s a sampling:
It would be about living within our means and understanding the difference between needs and wants. Money and finances do not have to be scary and out of control; we just need to be organized in our approach and stick to our plan. I would also encourage those workers to share their new found financial literacy skills with their young children to help them live financially well throughout their lives.
How to live within their means. Too often, we see they’ve committed themselves to large mortgages and large car payments that are stifling their ability to achieve other financial goals.
Retirement savings is a long-term goal.
Reduce/Reject Debt and Save – I have never met someone who had too much money in retirement.
If your personal federal tax rate is 0%(or much lower than it will be later in your career), use Roth 401(k).
Start saving something early.
Understand and manage your personal cash flow.
The beauty of compounding of their salary deferrals plus any company match.
Budgeting. I think people overestimate their earnings and underestimate their expenses. If they had a better grasp on what their income and expenses were, they would be able to start thinking about saving and retirement.
Spend less than your net income.
The debt snowball.
Contribution rate matters. You can have a fund with the best rate of return in the world, but it means nothing if a participant won’t put anything into it.
Eliminating credit card debt.
Budgeting.
Deferring is way of paying yourself first. Once you make a few initial decisions, it’s an automatic function that only needs to be revisited once a year.
Work to reduce or eliminate your debts. After you do manage your debts, use the freed up cash to save for retirement.
We'd have a serious discussion about The Ant and the Grasshopper. I might also want to talk to them about debt.
Budget– live within your means.
Begin saving early in their career by paying themselves first even if it is a small amount.
Reader Comments
We also got a number of reader comments on the subject of education, including:
I think it is so important to teach financial skills in grade school. I am a proponent of trying to educate whenever I have the opportunity and support those organizations that do campaign to provide a means to teach financial literacy. I would love to see more conferences where we can learn from each other about how to solve this need and best practices in place to do so (roundtables, panel discussions, compliance issues, new trends in communication within our industry etc.).
I think moving away from paper enrollment has hurt the average American worker. After educational meetings with construction workers, factory workers or hotel housekeeping staff, you know they won’t go home on their computers to follow the steps necessary to enroll. A different, more user-friendly approach, method needs to be implemented.
Education is something employers want – but not sure that it actually helps – we provide actual advice and that is what moves the needle. People need help – not necessarily education
The biggest challenge is the engagement of employees. there is plenty of great content, but the challenge is how do you get the content consumed by the end user?
We have to figure out a better way to educate. The campaigns are great for the employees who have access to a computer all day but many workers do not. We have changed our approach from ‘lunch and learn’ type meetings to 1-1 targeted sessions with the employees. We have about a 90% action rate when meeting 1-1.
I’m going to throw this idea out there. Your readers may disagree. My claim is that having workplace retirement plans may give workers a false sense of security about their retirements. They figure the employer has their back. Meanwhile, employers think someone else has the employees’ back (financial advisors, TPAs?). In the end, no one is doing what needs to be done. No one is owning the process. I would love to see retirement saving be removed from the employer realm. Employers can focus on making widgets, employees can take responsibility for their retirements.
By education, I assume you're still talking about financial education. All junior high schools and high schools should teach household budgeting and the basics of personal finances, i.e., how to balance a checkbook (even if bills are paid electronically), and how to save and spend money wisely to meet weekly, monthly, and annual goals (buy a car or house and pay for gas or utilities and taxes). Individuals should know how to be in control of their financial health.
Thanks to everyone who participated in our weekly NAPA-Net Reader Poll!
Oh, and while we’re on the subject of participant education, next week is National 401(k)/403(b) Day – an opportunity to remind participants of the importance of saving – and employees the importance of becoming a plan participant.
Here’s hoping you take advantage of the day!
