Joseph F. Coughlin, Director, Massachusetts Institute of Technology AgeLab
Know your audience. It’s the age-old principle for effective communication. And for retirement plan sponsors attempting to engage and persuade their workforce to save and invest now for the future, it’s never been more critical. But it is no longer enough to take into consideration basic audience demographics of age and gender when creating plan communications. Today’s plan sponsors must intuitively understand the context of the world in which their employees live and the struggles they face as multitudes of priorities compete for their attention.
Their divided attention
In our information economy, we are drowning in information, but we lack the attention needed to make sense of it all and what to focus on next. Known as “attention economics,” our capacity to allocate our attention is challenged by the sheer volume of information and complexity of the issues being directed toward us daily. This phenomenon is contributing to a new, ageless generational experience we might call Gen S, or Generation Stressed, with emphasis on “stressed.” Research suggests that employees of all ages are being confronted by unprecedented challenges to their time and energy, their well-being, their capacity to allocate attention and ultimately, their ability to engage in future planning.
Bottom line: Your employees are pulled in too many directions. They may acknowledge that retirement planning is a great thing, but they’ve got their job, their kids, and their life. They’ve got all these balls they’re juggling. Their agenda is profoundly full, and issues must compete not just for space, but for their time, focus and action. Beyond getting a place on their agenda, you’re essentially asking an employee to invest time and energy today in a person who doesn’t exist for another 10, 20 or 30 years. That distant person is not a priority, compared to the noise of more immediate concerns.
We can frame this challenge in terms of three characteristics of information present in our daily lives: volume, velocity and complexity.
Volume – In a typical day, think about how many things clamor for your attention. Even as you read this, you may be thinking about the stacks of paper on your desk, the project you haven’t started, or what to make for dinner. Within the context of our daily lives, we are faced with so many decisions, from what we will have for breakfast, what to wear, and what we will tackle first at work. And it intensifies. When we go online to research something, we are bombarded with ads. When we check email, we have to sift through spam, distracting us from the task at hand, and by the way, what were we doing again?
Velocity – The pace at which things come to us, and the speed in which we have to make decisions, is accelerating. The old adage “life is getting faster” would seem truer than ever. As technology has gotten better, it has not necessarily helped us manage our agenda better. In fact it has reset our baseline that we can do more in less time. For example, we used to get a fax, then we got a FedEx, then we got email. Now if we don’t answer a text within 30 seconds, the party on the other end wonders why not. Technology has increased our speed, but it has also increased the speed of the expectation that we will engage. We are hyperconnected, and with that comes high expectations. And given the volume we are enduring, these expectations can be unrealistic.
Complexity – Everything from what we should eat, how we should diet, what is in our 401(k) or 403(b) plan, the language of finance, and the language of everything … has gotten more complex. When we go to the grocery store, we are confronted with multiple versions of everything. Which product is better?
In the retirement world, we have more and more choices of investment options, including lifecycle funds, annuities and managed accounts. The list goes on. Out of necessity we put decisions aside, realizing the action required will take longer than we have time and appetite for. All the complexity actually works to put things off our agenda.
Paradoxically, all this information is supposed to give us greater choice, yet has given us even greater responsibility. And all that choice may even freeze us into inaction. Because technology gives us access to so much more data than we’ve ever had before, we now feel responsible for a whole range of content we never had to bother with before. For example, when we go to the doctor, we feel we must research our conditions thoroughly (because we can) and have a list of questions prepared
Getting on their agenda
The question becomes, with your employees juggling so many balls, how can your initiatives around retirement planning become one of the balls that come forward to capture an employee’s attention?
1. Make it easy – We know from research in behavioral economics that “auto everything” makes it much easier for employees. Create better guardrails through plan design so they have to make the effort to opt out versus opt in. Research shows that retirement plan participation can reach levels between 86% and 91% when an auto-enrollment feature is present.1 We also know that while employees who are auto-enrolled stay in the plan, many will stick with the default savings rate, often a low 2 – 3%. Consider establishing a higher default rate of 5 – 6% — the good news is that a higher rate doesn’t increase the likelihood that an employee will opt out.1
Being smart about how much choice you provide can make a difference in behavior too. Recent findings from the TIAA-CREF Institute indicate that the appropriate number of investment options for employees to choose from lies in the range of 5 to 10. The consensus is that this number can result in an appropriately diversified portfolio for the typical employee, without making it too hard to make investment decisions.2
2. Make it social – While we may be in a self-help age, we haven’t lost the desire to make connections with others. Make sure your employees know their challenges are shared. Employers can create social opportunities to allow sharing of experiences between employees. During these social interactions, employers can consider providing opportunities for employees to talk to financial advisors on a one-to-one basis. The results of getting people to talk with an advisor can be astonishing. A recent TIAA-CREF study shows that once individuals speak with an advisor, they are five times more confident about their retirement than the average American worker.3
Successful examples in the healthcare environment abound; for example, patient blogs can be strong sources of inspiration. There is evidence that people get well together. There are reasons to believe that peer support, and peer pressure, can be powerful means to help each other get a plan in place for the future. A little healthy competition between different groups in organizations may motivate as well.
3. Make it brief, and relevant – Since we live in a time where all of us are short on time and attention spans are limited, our communication needs and preferences have changed. The way we consume information is now in short bursts. Content online and on a mobile device is a given, but take care to make it brief. Retirement planning information and education should be available 24/7, and ubiquitous, so it’s there when your employees’ personal light goes on and they are ready to act.
An engaging online experience has the power to break through inertia. TIAA-CREF’s interactive and informative participant website, My TIAA-CREF, receives over 300,000 visitors each week. And among those who used the Retirement Advisor and Income Planner online advice tools, more than half chose to save more, revisit their portfolio allocation or rebalance their portfolio.4
As far as that person in the distant future who just so happens to be you? Keep the message relevant to employees’ concerns now. Consider framing it around something your employees do for others, not themselves. For example, if your baby boomer employees are now juggling both kids and caring for elderly parents, they may not want to burden their own children similarly someday. Redefining retirement as empowerment and financial independence may hold greater appeal than imagining ourselves getting old.
Your employees won’t fully engage in the right actions to improve their retirement readiness unless they’re listening — and you have a lot of competition. To break through the noise, you’ll need to align with the reality of your employees’ lives and how they connect with information. Try to shape communications with a more relevant and immediate feel and consider ways to create a two-way conversation and not just a one-way push. Make your messages simple, social and short — and easy to access. Retirement may be about the future, but the smart decisions to make it successful are made in the here and now.
1 Save More Tomorrow, Practical Behavioral Finance Solutions to Improve 401(k) Plans, Shlomo Benartzi, 2012
2 Rethinking Defined Contribution Plan Design: A Survey of Experts, Paul J. Yakoboski, TIAA-CREF Institute, August 2011.
3 Based on survey of 2,376 individuals who received TIAA-CREF advice via phone or in person from April through September 2011.
4 TIAA-CREF Advice and Planning.
Please note this material is prepared by and represents the views of Joseph Coughlin, who is not affiliated with TIAA-CREF. These views may change in response to changing economic and market conditions. Past performance is not indicative of future results. The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons.
TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities.