KnowHow Archive

Plan Sponsor Guide Participant Guide

Easy Doesn't Always Do It

In a day when most have access to technology with more processing power than the computers that took man to the moon, we seem to be less interested in simple than in "easy."

Not that the two are unrelated, but you can make things "easy" for a participant without making them simple. For instance, let's say all participants have to do to find out how much they need for retirement is log on to a Web site and put in their retirement date and current salary.
Voila! In nanoseconds, the result pops up, often in multicolored, three-dimensional splendor. The participant, with almost no intellectual involvement required, has "the answer."
The problem—particularly if that answer seems out of touch with reality (think of a 50-year-old who, for the first time, "discovers" that he is supposed to have accumulated a retirement nest egg 100 times the amount he actually has saved)—is that, with no involvement, the participant is unable to connect with the solution. The incredibly sophisticated result might as well be presented in a foreign language (albeit one with decimal places).
Now, simple and easy can be a powerful tool—but it can oversimplify. The calculation on the following page admittedly glosses over several things; the result is inflation-unadjusted and it does not take into account shifts in spending, the drain of health care, or the impact of Social Security, among other things. It makes no attempt to reflect the impact of compounded tax-free income—a factor that admittedly makes a huge difference in one's savings accumulation—nor does it consider the impact of a reduced cost of living in retirement, or make any accounting for an individual's tolerance for risk.
Still, I think you'll find that the combination—overlooking some items on the negative side, and others on the positive—in the end, pretty well washes out that impact, and it's simple enough to help the participant grasp the elements that go into the more sophisticated calculation.
I hope you enjoy this month's KnowHow, and that you find it effective at providing a communication that is both simple and easy for participants. I look forward to your comments.
                                                                                                                                                                                                                          —Nevin E. Adams, JD