Krista StreffMBC Final ProjectMay 14, 2007

Krista StreffMBC Final ProjectMay 14, 2007

How employers can more effectively provide retirement planning education to employees in the workplace

How employers can more effectively provide retirement planning education to employees in the workplace

The retirement savings gapThe retirement savings gap

“71% of all adults plan to work in some capacity for at least nine years while retired”

– Journal of Financial Planning

“The average worker needs to save $11,400 more annually to be on track for retirement”

– PlanSponsor

“64% of employees have never estimated the retirement dollars they’ll need”

– Benefits Quarterly

The FactsThe Facts

Retirement plans have changed significantlyRetirement plans have changed significantly

Employees are responsible to save for their own Employees are responsible to save for their own retirementretirement

Employers must educate employeesEmployers must educate employees

Employees are responsible to save for their own Employees are responsible to save for their own retirementretirement

Employers must educate employeesEmployers must educate employees

Current employer programsCurrent employer programs

Potential for programs is great Potential for programs is great

Difficult to drive desired outcome Difficult to drive desired outcome

Current communications lack impact Current communications lack impact

Need to determine most effective ways to Need to determine most effective ways to educate employees educate employees

Potential for programs is great Potential for programs is great

Difficult to drive desired outcome Difficult to drive desired outcome

Current communications lack impact Current communications lack impact

Need to determine most effective ways to Need to determine most effective ways to educate employees educate employees

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Research Question

“Is employee participation in employer-sponsored retirement plans

positively influenced by corporate communication initiatives?”

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MethodologyMethodology

Sample of 180 employees working for Sample of 180 employees working for companies offering a retirement plancompanies offering a retirement plan

Online survey with 27 questionsOnline survey with 27 questions

Respondents given two weeks to complete the Respondents given two weeks to complete the surveysurvey

Sample of 180 employees working for Sample of 180 employees working for companies offering a retirement plancompanies offering a retirement plan

Online survey with 27 questionsOnline survey with 27 questions

Respondents given two weeks to complete the Respondents given two weeks to complete the surveysurvey

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ResponseResponse

116 respondents (64% response rate) 116 respondents (64% response rate)

Diverse sampleDiverse sample 40% male and 60% female40% male and 60% female Represented 12 different industriesRepresented 12 different industries Ages 18 to over 65 Ages 18 to over 65 Variety in number of years until retirement Variety in number of years until retirement

(40% had over 20 years, 23% had under 5 years) (40% had over 20 years, 23% had under 5 years)

116 respondents (64% response rate) 116 respondents (64% response rate)

Diverse sampleDiverse sample 40% male and 60% female40% male and 60% female Represented 12 different industriesRepresented 12 different industries Ages 18 to over 65 Ages 18 to over 65 Variety in number of years until retirement Variety in number of years until retirement

(40% had over 20 years, 23% had under 5 years) (40% had over 20 years, 23% had under 5 years)

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Identifying the missing linkIdentifying the missing link

91% said company retirement plan was important 91% said company retirement plan was important to achieving their overall retirement savings goalto achieving their overall retirement savings goal

100% of respondents’ companies offered 100% of respondents’ companies offered retirement plan(s)retirement plan(s)

Yet 40% were dissatisfied with retirement Yet 40% were dissatisfied with retirement planning communicationsplanning communications

91% said company retirement plan was important 91% said company retirement plan was important to achieving their overall retirement savings goalto achieving their overall retirement savings goal

100% of respondents’ companies offered 100% of respondents’ companies offered retirement plan(s)retirement plan(s)

Yet 40% were dissatisfied with retirement Yet 40% were dissatisfied with retirement planning communicationsplanning communications

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Response to current communicationsResponse to current communications

Respondents asked to rank how often they read retirement plan communications from their employer.

Often Quarterly statements 70% Plan change announcements 51% E-mails 44% Home mailings 44% Materials provided at meetings 36% Interoffice mail 33% Intranet postings 14%

Respondents asked to rank how often they read retirement plan communications from their employer.

Often Quarterly statements 70% Plan change announcements 51% E-mails 44% Home mailings 44% Materials provided at meetings 36% Interoffice mail 33% Intranet postings 14%

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Response to current programsResponse to current programs

Current employee program participation levels

General educational sessions 46% Individual meetings 28% Retirement modeling software 24% Web-based seminars/online videos 20% Participant call center 12% Traditional videos 1% N/A (programs not available) 25%

Current employee program participation levels

General educational sessions 46% Individual meetings 28% Retirement modeling software 24% Web-based seminars/online videos 20% Participant call center 12% Traditional videos 1% N/A (programs not available) 25%

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Retirement readinessRetirement readiness

To what extent do you agree with this statement:To what extent do you agree with this statement: “I am confident that I will “I am confident that I will be financially ready for retirement.”be financially ready for retirement.”

Strongly agree 14% Agree 44% Unsure/undecided 31% Disagree 8% Strongly disagree 3%

To what extent do you agree with this statement:To what extent do you agree with this statement: “I am confident that I will “I am confident that I will be financially ready for retirement.”be financially ready for retirement.”

Strongly agree 14% Agree 44% Unsure/undecided 31% Disagree 8% Strongly disagree 3%

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Employee estimated retirement savings needsEmployee estimated retirement savings needs

0%

5%

10%

15%

20%

25%

30%

$100,000 -$249,000

$250,000 -$399,000

$400,000 -$549,000

$550,000 -$799,000

$800,000 -$949,000

$950,000 -$1.1 million

Over $1.5million

Amount (Dollars)

Per

cen

t

35% estimated under $550,00035% estimated under $550,000

Mean account balance for workers 55-64 is $53,600Mean account balance for workers 55-64 is $53,60011

1 1 Plan Sponsor survey, 2005Plan Sponsor survey, 2005

35% estimated under $550,00035% estimated under $550,000

Mean account balance for workers 55-64 is $53,600Mean account balance for workers 55-64 is $53,60011

1 1 Plan Sponsor survey, 2005Plan Sponsor survey, 2005

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Impacts of education programsImpacts of education programs

Improved results for employees with employer Improved results for employees with employer education programseducation programs

Employees with education programs 30% more Employees with education programs 30% more confidentconfident

Employees with education programs were Employees with education programs were saving moresaving more

- 82% saving at least 4% of salary vs. 63% of those 82% saving at least 4% of salary vs. 63% of those without education programs saving the samewithout education programs saving the same

Improved results for employees with employer Improved results for employees with employer education programseducation programs

Employees with education programs 30% more Employees with education programs 30% more confidentconfident

Employees with education programs were Employees with education programs were saving moresaving more

- 82% saving at least 4% of salary vs. 63% of those 82% saving at least 4% of salary vs. 63% of those without education programs saving the samewithout education programs saving the same

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What drives employee behavior?What drives employee behavior?

MotivatorsMotivators Employer incentives Employer incentives Personalized programs & communications Personalized programs & communications Simplified enrollment processSimplified enrollment process Education seminarsEducation seminars

De-motivatorsDe-motivators Competing financial needsCompeting financial needs Uncertainty of how plan worksUncertainty of how plan works Dissatisfaction with the planDissatisfaction with the plan Difficult enrollment processDifficult enrollment process

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Are employer’s communication efforts working?

Yes….some types of communications and programs are effective in positively

influencing employee behavior

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Emphasize employer incentivesEmphasize employer incentives Company matching contributions #1 motivatorCompany matching contributions #1 motivator

Simplify messages Simplify messages 30% aren’t participating due to lack of understanding30% aren’t participating due to lack of understanding

Personalize communications & programsPersonalize communications & programs Help with calculating personal retirement savings needs Help with calculating personal retirement savings needs

#1 motivator for non-participants #1 motivator for non-participants

Emphasize employer incentivesEmphasize employer incentives Company matching contributions #1 motivatorCompany matching contributions #1 motivator

Simplify messages Simplify messages 30% aren’t participating due to lack of understanding30% aren’t participating due to lack of understanding

Personalize communications & programsPersonalize communications & programs Help with calculating personal retirement savings needs Help with calculating personal retirement savings needs

#1 motivator for non-participants #1 motivator for non-participants

Effective education programs…Effective education programs…

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Simplify & personalize all communicationsSimplify & personalize all communications Share best practices across the companyShare best practices across the company Keep employees’ needs & motivators top ofKeep employees’ needs & motivators top of mindmind Advocate for financial education programs in the Advocate for financial education programs in the

workplaceworkplace

Simplify & personalize all communicationsSimplify & personalize all communications Share best practices across the companyShare best practices across the company Keep employees’ needs & motivators top ofKeep employees’ needs & motivators top of mindmind Advocate for financial education programs in the Advocate for financial education programs in the

workplaceworkplace

Next stepsNext steps

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Questions?