Fidelity myPlan Aims to Break Retirement Savings Inertia
According to Fidelity’s research, nearly three-quarters of people consider themselves planners when it comes to vacations, birthdays and holidays, but, when faced with something less immediate such as finance planning, the number is a far less robust 29%. A quarter of Americans say they have a clear retirement plan in place.
Fidelity’s myPlan product aims to help plan participants stop procrastinating when it comes to retirement planning by simplifying the process and helping them over the initial barrier of getting started, according to the company. Some 58% of Americans say that is the most difficult part and the biggest reason why Americans are saving an average 3.3% annually for retirement, according to Fidelity research.
The product is something else plan sponsors can use to engage participants in retirement planning, Abigail Johnson, president of Fidelity Employer Services Company (FESCO) told PLANSPONSOR.com in an interview Tuesday. Johnson was put at the head of Fidelity’s HRO and retirement services business in May 2005, as part of a major management shift at the company where her father is chairman and chief executive officer (See Abigail Johnson Moves to FESCO in Sweeping Fidelity Reorganization ).
The first part of the product is called myPlan Snapshot, which gives the user a dollar estimate of how much he or she will need to retire by asking five questions that include monthly contribution amounts, expected retirement age, and preferred investment style.
The final figure comes in two variations, one if the market performs at average, and the other if it has poor performance. “It’s not a perfect [number], but it’s a darn good one. It’s better than not having an answer at all” said Ellyn McColgan, president of Fidelity Brokerage Company, at a news conference Tuesday in New York City. The point, she continued is to get individuals thinking and on the way to planning.
The second part of the process is a revamped version of Fidelity’s Retirement Quick Check, a more in-depth step-by-step process that helps users create a retirement plan in about 30 minutes, according to the company.
A Lesson in Immediate Gratification
One reason why people put off saving for retirement is not only that financial planning seems too complex to tackle, but also where the need to do so is not immediate, said Brigette Madrian, a professor at the Harvard University Kennedy School of Government and an expert on employee savings behavior in employer-sponsored plans, at the news conference.
“Retirement planning does not have the same urgency as other complicated decisions,” such as mortgages, car insurance and taxes,” Madrian said, explaining that retirement planning lacks the same short-term deadlines such as needing to move in to a house or meeting the April 15 income tax deadline.