Plan Sponsor

A troubling trend has emerged in the retirement planning space: The “magic number” — or amount of money Americans believe they need to retire comfortably — has surged to an all-time high, even as actual retirement savings have declined. This growing disparity or “magic number gap,” highlights a significant and escalating challenge for both participants and plan sponsors. Northwestern Mutual’s 2024 Planning & Progress Study reveals that U.S. adults now believe they will need $1.46 million to retire comfortably, a 15% increase from the previous year’s target of $1.27 million and a jump that far exceeds the current rate of inflation.

A recent Gallup survey found that engagement at work has cratered among U.S. employees, with only 33% of workers were engaged in 2023. With engagement on the decline, that can mean decreased productivity, higher turnover, lower profitability, and a host of other problems for the organization. With this in mind, the company’s retirement plan can be leveraged as a powerful tool to help increase engagement and combat many of the negative sentiments among today’s workers.

Effective retirement plan communications do more than just meet DOL requirements; the best ones engage, educate, motivate, and empower participants. Optimize your communications to connect with employees on a personal level, encourage informed decisions, and foster more active engagement with their retirement plan and their financial future. Effective, empathic communications help build a foundation of trust and confidence in the plan benefits — and the employer.

Sound investment decisions are rarely made under the weight of worry. The field of behavioral finance points to a number of cognitive distortions that feed on investor fear and can plague participants’ decision-making while compromising their retirement readiness. Here are some that can send shivers down participants’ spines — and ways sponsors can help them cope.

According to the Employee Benefit Research Institute's 2023 Retirement Confidence Survey of 2,357 Americans, workers’ and retirees’ confidence that they’ll have enough savings to comfortably support themselves through retirement has dropped to levels not seen since the 2008 global financial crisis. The findings show 64% of workers feel “at least somewhat confident,” with only 18% feeling “very confident” as they remain concerned about inflation and the possibility of recession. Employers can deploy several strategies to help.

Financial stressors, including stubbornly high inflation and historic levels of credit card debt, continue to impact workers across a wide range of income brackets. Research concludes that employees often run out of money in between paychecks. Due to this, professional retirement planning assistance has become a key focus for employees in terms of benefits considerations.