Auto-escalation can be a painless way for participants to incrementally increase the amount they save over time, without the contribution rate increase seeming too dramatic or threatening. You could even recommend that plan sponsors time this increase to coincide with when a pay increase shows up in a participant’s paycheck to minimize the impact. Coupling a reasonable default contribution rate—such as 5 or 6 percent—with an auto-escalation plan of, say, 1 percent each year, can help set participants up for better retirement savings success.
“I Don’t Want To Make The Wrong Choice”: Highlight Managed Services
Some plan participants prefer a hands-on approach to their retirement planning and are comfortable making their own savings rate and investment decisions. However, for other participants who want a more hands-off “do it for me” approach, a managed service may be a better fit.
Managed services are typically made available as part of a plan’s overall investment option choices. They are also approved and available as a QDIA within an automatic enrollment plan design solution. These services help customize a retirement plan based on a plan participant’s goals, investment risk tolerance, retirement timeline and projected retirement income needs. Knowing that their retirement plan is being managed by professionals with the appropriate experience and expertise can instill more confidence and provide reassurance to plan participants.
Every plan participant will process information and make decisions differently, but recognizing and preparing for these behavioral finance tendencies can help participants overcome retirement planning barriers before it’s too late.
Ken Waineo is the senior director of retirement plan business development and sales operations at The Standard. Waineo has over 18 years of experience working with 401(k), 403(b), and defined benefit and 457(b) plans.
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