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retirement digital

It’s fairly common knowledge that many Americans are facing a retirement savings gap. In 2015, the gap between what they needed to have saved and what they’ve actually saved was $28 trillion. But it gets worse: the World Economic Forum now says that the gap is expected to grow to a whopping $137 trillion by 2050.

While individuals must ultimately make up this gap, there are a lot of things that employers can do to encourage retirement savings. A new study from JD Power shows that employers and their retirement plan partners simply aren’t doing enough when it comes to one key metric: engaging with retirement plan participants digitally.

If you want to bolster your retirement savings, a financial advisor could help you put a retirement plan together. SmartAsset’s free financial advisor matching service can connect you with up to three local advisors.

How Retirement Plans Are Failing

The biggest issue, a JD Power survey found in September 2021, is that retirement plans simply aren’t doing a good enough job in meeting the digital needs of consumers enrolled in workplace plans. The study found that only 24% of retirement investors strongly agree that their provider offers proactive guidance, while just 43% found it very easy to locate the information they need to make investment choices on either a retirement plan website or a mobile app.

“Very often an individual’s first experience with investing happens within an employer-sponsored plan, giving these plan providers an inside track to build a relationship and retain and grow the participant’s assets long after they have separated from their current employer,” said Mike Foy, senior director of wealth management intelligence at J.D. Power, in a release. “Many of these providers have invested significantly in developing digital content and tools to provide education and guidance, but if participants are unaware of those resources or can’t easily find or use them, it’s a huge missed opportunity.”

How Plan Sponsors Can Act

retirement digital

There are a few key ways plan sponsors and retirement plan providers can act to increase the savings rate and help close the retirement gap.

The first is to look for proactive guidance. JD Power uses a 1,000 point scale to measure satisfaction. The scores went up 51 points among retirement plan participants when a retirement plan provided prospective guidance via digital channels. Participants who get this type of guidance are 25 percentage points more likely to keep their assets with their current plan sponsor — yet just 24% of plan participants say their retirement plan offers this type of guidance.

Improving the mobile app experience is also important. Generally, surveyed participants were happier with their mobile app experience than with a website, but only 35% of plan participants had downloaded their retirement plan app, which is low when compared with 52% of energy provider customers who did. Encouraging employees to download the app, perhaps even asking them to do it in person (or via Zoom) during an informational session could increase participant satisfaction and encourage a higher savings rate.

Which Providers Are Doing the Best

Some retirement plan providers are doing better at meeting customers’ needs than others. According the JD Power, the top five providers by customer satisfaction are:

  • Charles Schwab
  • Bank of America
  • AIG Retirement Services
  • T. Rowe Price
  • Fidelity Investments

Some of the providers that scores less well include Voya Financial, ADP Retirement Services and Nationwide.

What You Can Do to Close the Retirement Gap

When it comes to workplace retirement plans, there is a lot that you as an individual can’t change — you can’t pick a different plan provider, as that is decided at a company level. That said, if you are concerned about the service you’re getting, you can talk to your company’s human resources department and encourage them to either look for a provider that has a better suite of tools or ask them to work with your existing provider to see how the tools could be better utilized.

On an individual level, you can make sure you’re doing everything possible to bolster your own savings. You can start by enrolling in automatic increases to your 401(k) contribution so that the amount of money you contribute goes up each year. You can also make sure you’re saving in other ways, such as opening a personal brokerage account and investing money to be saved for retirement. And don’t forget to compare savings strategies with friends and coworkers so that more people are knowledgeable about the retirement savings gap and what is needed to close it.

Finally, if your prefer to work with a financial advisor, SmartAsset’s 2021 study on how COVID changed the way financial advisors communicate with clients shows that more than 30% expect to connect with clients via video call after social distancing mandates are lifted. This is 28% higher than video conferencing preferences before the pandemic, and is consistent with the wealth management industry’s wider shift to a remote-first model for client meetings. Such meetings can help workers strategize their retirement plans.

Bottom Line

retirement digital

Americans aren’t saving enough for retirement, and one of the reasons may be that retirement plan sponsors and providers aren’t meeting their digital needs, especially on mobile devices. There are some steps that can be taken, though, to help people save more, including increasing the use of mobile apps and providing more upfront guidance to help people get the most out of their workplace retirement plans.

Retirement Planning Tips

  • No matter what your employer is offering you, working with a financial advisor is a good idea for planning your retirement. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor, get started now.
  • One thing to make sure you do with your 401(k) or other workplace retirement plan is take advantage of any employer match available. This is literally free money, so it makes no sense to leave it on the table.

Photo credit: ©iStock.com/Fly View Productions, ©iStock.com/Inside Creative House, ©iStock.com/marchmeena29

Ben Geier, CEPF® Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society for Advancing Business Editing and Writing and a Certified Educator in Personal Finance (CEPF®). When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.
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