On the Long Road to Retirement, Checkpoints are Key

 In Retirement Planning & Wealth Management

Preparing for retirement can take decades. Retirement expert Ben Rizzuto explains why ongoing support is key to effective planning.

Short-term actions yield short-term effect. This is especially true in financial education, where a recent report1 from the Pension Research Council at The Wharton School found that programs that follow up with participants or that operate continuously are most effective.

Our financial lives aren’t static; they change throughout the retirement saving process.

On the Long Road to Retirement, Checkpoints are Key | Janus Henderson Blog

It may be time to evolve past a one-and-done education strategy in favor of planning that’s both consistent and dynamic.

According to the study, financial education programs that included follow-ups delivered to employees around the age of 40 optimally enhance savings by close to 10% at the time of retirement. Assuming a retirement age of 67, employees who have been followed up with since age 40 will have logged nearly 30 years of personalized education by the time they retire. That adds up to a lot of opportunities for plan sponsors to continue to support employees by engaging through tactics that work best for the particularities of the demographic involved – whether through videos, print materials, live sessions or even podcasts.

To paraphrase an old political phrase about voting, “educate early, educate often.” An employee who planned to retire at 65 but didn’t save enough may be hard to reach, especially late in his career. Our previously mentioned well-served mid-career employee is bound to be more willing to listen and learn. The key takeaway you can impart to your clients is to establish enthusiasm and confidence in retirees at the outset of the planning process, then build a strategy based on this solid foundation.

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Bridging the Retirement Conversation Gap

More education is good, but a consistent schedule of relevant follow-ups is even better. For example, companies might improve their enrollment protocol by offering a week of employee presentations and meetings instead of one afternoon. That’s an important step, but it still overlooks the fact that planning can take decades. Typically, conversations about retirement take place during two periods. The first discussion happens when the worker is first hired and probably covers plan details and enrollment policies. The second may not occur until the worker is near retirement, at which point it’s a little late to make adjustments.

To keep the lines of communication open and flowing, advisors can add value to their plan sponsor clients by helping them maintain an ongoing and varied dialogue with their plan participants. Consider staggering the delivery of materials so the recipient doesn’t feel overwhelmed, and craft a follow-up game plan to suit personality types, schedules and status (newly enrolled, on track, running behind, nearing retirement).

Following up with participants may also mean checking in on general financial concerns such as daily living costs and paying down debt. Perhaps they’d like to receive advice about overall financial wellness as well as retirement. Even if they’re not quite on track after receiving guidance, in many cases they’ll still feel better after a chat.

Another opportunity to add value may arise when participants who initially don’t qualify for a contribution matching program become eligible later on. Whether or not the matching policy is clearly articulated by the employer – and in a perfect world, it always would be – your clients can enhance their service model by staying on top of eligibility along with other details.

Retirement planning is a long road for everyone involved – advisors, plan sponsors and, of course, the retirees themselves. You might think about emphasizing the importance of follow-ups by comparing them to friendly inns along the way: They provide the perfect opportunity for all parties to reflect on how far they’ve come and prepare for the next stage of the journey.

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1Lusardi, Annamaria, Michaud, Pierre-Carl and Mitchell, Olivia S. Assessing the Impact of Financial Education Programs: A Quantitative Model. Pension Research Council, The Wharton School, University of Pennsylvania, April 2018. pensionresearchcouncil.wharton.upenn.edu/wp-content/uploads/2018/04/WP-2018-4-Lusardi-et-al.pdf

C-1018-20293 04-30-20