Phasing Out Retirement Jargon

Complex retirement planning terminology isn’t just tough for participants to understand. Plan sponsors are having difficulty, too.

Retirement planning is a stressful journey, unsurprising to many. From projecting desired income sums to understanding the retirement savings process, preparation can be an overwhelming course. And the jargon isn’t helping—neither for the participant nor the plan sponsor.

This jargon, including a motley of abstruse terms like Social Security optimization and glidepath, can discourage participants from engaging with their retirement plan, reports say. A 2019 Invesco study found when participants were presented with a “personalized, plain-English and positive short description” of a retirement plan, 54% were either very or extremely likely to stay in the plan with a monthly payout feature.

“Very few people want to talk about investments in the abstract or theory,” explains Greg Jenkins, the head of Institutional Defined Contribution at Invesco in Texas. “People would rather talk about investments in terms of their goals, that’s much more meaningful to them.”

For employers—especially smaller plan sponsors—these terms can prove just as trying. At smaller institutions, where managing the retirement plan does not encompass a full 40-hour work week, comprehension levels are comparable to participants, says Steve Jenks, chief marketing officer at Empower in Colorado. “It’s different when you get into the very large end of the market, where overseeing a retirement plan is somebody’s full-time job,” he says.

Smaller plan committees, whose members as fiduciaries structure the workplace plan, are not commonly fluent in technical terms like Social Security optimization, Jenks adds. When it comes to this specific terminology, plan sponsors cannot assume the committee will understand all terms. It’s far more effective to break down the language.   

Even those who understand the lingo aren’t welcoming to the terminology. Words such as “glidepath,” “best in class” and “institutional quality” that may resonate with plan sponsors aren’t necessarily adopted, mentions Jenkins. Adding plan-English definitions, such as a rebalancing strategy for investments or a risk-reduction path, are preferred over the jargon. “There are some words that work with plan sponsors, where they may understand what providers are talking about, but the participants don’t,” he adds.

Financial advisers and providers can take advantage of their own knowledge to simplify jargon for plan sponsors and participants. For example, providers tend to use unfamiliar terms such as noncorrelated asset management, hedging, and different types of derivatives, notes Jenkins. He says that while some will assume the plan sponsor will understand, the reality is many employers misinterpret the meaning. Terms like this are misunderstood or are misconstrued because, for many plan sponsors, that’s just not their world.

This means that most of the responsibility sits with the providers. Just how providers need to communicate with participants and incorporate their language, the same should be done with plan sponsors, Jenks argues. Instead of exhausting retirement terminology, providers can consult with employers on adjusting the language.

If a plan sponsor has trouble interpreting vocabulary and its provider has not conferred with it, Jenkins suggests employers push back. Ask providers to explain what terms mean and if there are any plain-English meanings that can help with understanding. The end goal for providers is to build communication for all three parties—themselves, the employer and the participant. “Plan sponsors are communicating to an employee,” he says. “It’s the same responsibility that providers have when communicating with employers.”