Retirement, Financial Wellness, and the Power of Simplicity
One of my favorite personal finance bloggers, J. Money, recently wrote a piece on the Beauty of Simplicity, that, in my opinion, should be required reading for pretty much everyone - and particularly for retirement plan sponsors. Why? Because we often make the participant experience far too complicated, and it could be harming them!
For example, let’s take the retirement plan enrollment process. For participants, it should as simple as internet or app shopping. There’s a reason why it’s so successful - the interfaces make it easy for users to easily part with their cash! Plan sponsors need to make it that easy for people to save for retirement. I have experienced retirement plan interfaces where I could not figure out how to enroll or even log in to the app or website, and I do this for a living. The needless complexity has to stop if we are going to move the needle on participant engagement.
The same complexity issue may also be spreading to financial wellness/independence. Some plan sponsors are trying to assist employees with almost everything financial (student loan debt, emergency savings, credit card debt, HSAs, etc.), and are even attempting the daunting task of integrating financial wellness into their medical wellness programs. I fear that, for these sponsors, nothing will be accomplished in this critical area, because many employees are simply looking for their needs to be met, rather than complicated holistic programs.
As indicated in J. Money’s blog post, many individuals already lead financially complex lives that can greatly benefit from simplification. So many people fail at financial independence because they try to do too much at once, achieve no immediate satisfaction, and then give up. Thus, the financial wellness/independence message from plan sponsors should be to focus on doing one thing that will improve their financial pictures, enjoy the satisfaction of accomplishment, and then use that as momentum to do other things. In my opinion, it won’t work to throw all the possible elements of financial wellness/independence programs at participants and see what sticks. Instead, plan sponsors should focus on one item with broad appeal (e.g., emergency savings, or better yet, survey participants to determine where they need the most assistance), implement that one element successfully, then, like participants, use that element to build momentum and roll out other pieces of an overall financial wellness program, one at a time.
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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