Leveraging decades of behavioral-finance research and big-data analytics, Vanguard has revamped its digital capabilities to help participants boost their retirement readiness.
When logging on to the new participant Web portal, investors immediately see their account balances and retirement readiness indicators, which illustrate progress toward a particular retirement goal. Participants are also presented with personalized recommendations such as boosting contribution rates by a slight amount to meet the company match.
These “nudges” consider several unique factors such as a participant’s current savings rate, company’s match, and targeted retirement age.
The proprietary technology underlining the new Web portal is The Vanguard Retirement Readiness Tool. This allows participants to visualize what their projected retirement outcomes would look like based on “what-if” scenarios such as changing deferral rates or expected retirement age. This helps them know whether they are on track to have sufficient income in retirement and what to do if they are not.
Vanguard notes, “The tool uses assumptions, such as future contributions and forecasts from the Vanguard Capital Markets Model, to project how savings will grow over time. Applying an adjustable 4% withdrawal rule, participants are able to see an estimate of their future monthly retirement income—refreshed upon each login to maintain an up-to-the-minute accurate picture.”
The firm is also updating its Personalized Participant Journeys, which factors in behavioral finance research and big-data analytics to “deliver the right message at the right time to encourage a participant to take his or her next best action.” These messages are delivered through multiple channels including the participant website, email, and online education sources.
Vanguard says 99% of the plan sponsors it services have adopted Personalized Participant Journeys. In the past year, more than 283,000 participants have taken action to help improve their retirement readiness, such as increasing savings rates and updating beneficiaries.
“Part of Vanguard’s core purpose is to help investors achieve retirement success, and we are continuously evolving our technology capabilities and digital communications to improve the 401(k) participant experience,” says Lauren Valente, head of Participant Experience and Recordkeeping Services for the Vanguard Institutional Investor Group. “Our reiterative, test-and-learn approach ensures we are using the right technology, channels, and messages for plan sponsors to best reach employees and help drive better retirement outcomes.”
Like Vanguard, several recordkeepers are leveraging technology and enhancing digital tools to boost participant engagement and help them improve retirement preparedness. To hedge against longevity risk and other common participant fears, plan sponsors are also turning to in-plan retirement income options and holistic financial wellness programs to help participants secure a comfortable retirement in light of market risks.
For more information about Vanguard’s new digital offerings, visit vanguardinstitutionalblog.com.
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