Article

HR Answers: The 401(k) Knowledge Deficit

financial advisor reviews retirement plan with couple
By Susan Reynolds

4 minutes

Survey shows employees need help understanding how their retirement plan works.

A 2018 survey of 401(k) plan participants suggests that if you want to help your employees save enough to retire on time, help them understand how to more effectively use the retirement saving tools and resources you offer. 

The survey, by CUNA Mutual Retirement Services and published in our Retirement Education Preferences: 2018 Participant Survey Results eBook, measured 9,200 responses from participants across 321 plan sponsors.

Respondents were asked to rank their interest in seven finance and retirement planning topics (the percentage represents how many respondents ranked the topic as their highest interest):

  • 25 percent: Understanding tools and resources available
  • 24 percent: Budgeting and managing debt
  • 18 percent: Smart retirement saving practices
  • 13 percent: Preparing to transition to retirement
  • 12 percent: Basic investment principles
  • 6 percent: Advanced investment principles
  • 1 percent: Other

Need for Financial Wellness Crosses Age Groups

“Understanding tools and resources available” was ranked the number one or number two topic of interest by all three age groups measured: Millennials (18–34), mid-career (35–49), and older (50+).

Among millennial respondents, 35 percent ranked “budgeting and managing debt” number one and 23 percent chose “understanding tools and resources available.”

Among the mid-career age group, those same two topics were tied at 26 percent as the number one choice. And 31 percent of respondents 50 and older ranked “preparing to transition to retirement” as their top topic, with 26 percent choosing “understanding tools and resources.” 

Taken together, the most highly ranked topics show that participants’ interest go beyond retirement planning to “financial wellness.” This more holistic term encompasses the role of financial security in a person’s overall physical and mental health. 

The goal of credit unions that promote financial wellness is to reduce employees’ anxiety, so they’ll stay healthier, more productive, and more responsive to members. 

Two Surprises in Preferred Methods of Education

Participants were asked to rank their preference for seven methods of education for retirement planning. The graph below shows that the average ranking for each method, so the smaller the number, the more highly the method was ranked. 

The main takeaway is that, overall, the average rank was almost the same for each method—the difference between the highest ranked education method and the lowest is only 0.4.

Average Rank of Preferred Retirement Education Methods
(The lower the number, the higher the survey respondents ranked the method.)

  • 3.3: In-person training held at their office
  • 3.4: Short, topical videos they can watch online when it’s convenient
  • 3.4: Self-guided learning modules that allow me to go as deep on a topic as I like
  • 3.6 Virtual training meetings I can join on my computer
  • 3.6 One-on-one discussions (in person or via phone)
  • 3.7: Personalized email messages

The breakdown of these results by age group yielded a couple of surprises. First, the age group that most preferred in-person training and one-on-one discussions wasn’t 50-plus, as you might expect, but millennials.

The other unexpected result was that the 50-plus age group actually favored electronic training methods slightly more than millennials. 

The lesson for credit unions from these unexpected results: Don’t presume the age of your employees dictates how they want to learn about retirement planning—so offer all your employees a full array of education methods.

Two Red Flags

Survey respondents were asked to choose which of the following best describes their current place on their journey to retirement:

  • 30 percent: I know what the plan is, but I could use some help with the tools and resources.
  • 25 percent: I’m in the plan, but I haven’t reviewed or changed anything since I first enrolled.
  • 20 percent: I am familiar with the tools and resources available to help plan for retirement.
  • 16 percent: I am confident in my understanding of my plan and how to use resources.
  • 9 percent: I don’t understand the plan or the tools and resources.

Only one in five say they’re familiar with the retirement planning tools and resources available to them. Another alarming result is that one in four respondents said they haven’t reviewed or changed anything since first enrolling in their plan.

It’s clear that the journey to retirement for many employees is more uncertain than it needs to be. 
If you’ve given your employees tools and resources they can use to improve their financial wellness, that’s excellent—but you’ve only taken the first step.

Now, take the rest of the journey with them. Work with your retirement plan provider to deliver regular educational programs through a variety of channels to meet the diverse preferences of your employees.

Track whether your employees are on target to retire when they should, and offer support for employees who aren’t. Because if you’re going to offer a retirement plan, you want it to be one that works.

Download a complimentary eBook summarizing the findings and insights from CUNA Mutual Retirement Solutions’ 2018 Retirement Education Preferences Survey.

Susan Reynolds is the director of retirement solutions for CUESolutions Platinum provider CUNA Mutual Retirement Solutions. Reach her at susan.reynolds@cunamutual.com.

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