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Budgeting and Retirement Plan Engagement

Recently, I had the pleasure of viewing a demonstration of a retirement plan recordkeeper’s budgeting portal for plan participants. The portal allows participants to easily calculate how much they could spend on employer-provided benefits and then allocate those benefit dollars in a manner that would be most financially efficient for them. It used the latest in behavioral finance technology to ensure maximum utilization, and obviously cost a lot of money and time to put together.

Okay, so you may be asking yourself, “Why in the world would a retirement plan recordkeeper be providing a budgeting portal?” Well, one answer could be that the recordkeeper just likes to throw away money; but, in the current competitive environment, that is likely not the case. The far more likely answer is that this recordkeeper has hit the wall on increasing retirement plan savings and other engagement rates (autoenrollment, for example, has leveled off from its explosive growth in prior years), and is therefore thinking outside the box in terms of how to grow retirement plan assets.

The reality today is that the primary reason why participants do not save (or do not save MORE) in retirement plans is their belief that they cannot afford to do so. Historically, the recordkeeper approach to this problem has been something along the lines of “Buy fewer lattes and you can afford to save for retirement,” so I am delighted to see that there is now some next-level thinking in addressing the problem of affordability.

But, is providing an easy-to-use budgeting program a panacea? Of course not, but it is a step in the right direction. People who budget are far more likely to be able to afford retirement savings, since by budgeting they are getting a handle on the all-important revenue versus expense equation. If they are spending more than what they earn, they cannot save, period. Thus, they need to either increase income or spend less. Retirement recordkeepers who are on the front lines of providing solutions in this area, by engaging participants in budgeting, building emergency funds, managing debt, etc., will be leaders in the marketplace, in my opinion. What are your views on retirement plan solutions providing next-level solutions to address participant engagement? Hit me up on Twitter or at

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

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