As known within the retirement industry, retirement saving can be a laborious duty for participants. For plan sponsors and advisers, urging employees to take action towards retirement planning can be an even tougher debacle.
Due to a lack of retirement planning emphasis found in solely predicting and eyeing account balances, Empower Retirement altered the attention to present an estimated monthly income replacement in retirement for participants.
Started in December 2010 and conducted through September 2016, Empower studied participant savings outcomes upon introducing predicted monthly retirement income, and found that employees in their plans are likely to save better and have higher engagement. Before implementing the new approach, Empower would present participants with an accumulated balance of assets to show retirement savings. According to the company, the change began when Empower started utilizing both the monthly income replacement rate and accumulated balance forms, after the idea of a monthly income rate for participants was created.
The study shows that when individuals view their projected monthly income in retirement, those who take action increase their savings rate by 8% (7.07% to 8.4%), on average.
To add a more holistic view on retirement income, Empower then added a health cost estimator and a peer comparison feature, including using web sessions for participants.
Those who gained insight on health care costs in retirement saved more in order to meet their expense goals, with a 22% increase in deferral rates (8.64% to 10.54%). In addition, peer comparison was a great motivator. Individuals presented with data that shows how much their peers are saving and have already accumulated made an average savings increase just under 22% (7.8% to 9.49%).
Overall, the study found that over a six-year period, projected income replacement scores in plans managed by Empower increased from 68% to 77.8%. Participants over the six-year period were 30,000 employees from 569 of Empower’s retirement plans, with each using Empower’s Participant Experience feature.