Math Anxiety Impedes Achieving Retirement Readiness by Steff Chalk
Math Anxiety is a good place to begin when looking for a reason for poor retirement savings rates. Math anxiety has surfaced as being an affliction a lot of workers experience. However, the good news is, math anxiety can be managed, and plan sponsors can play a role in helping ease an employees’ fears when it comes to retirement planning.
Retirement and investment planning expert and chief contributing editor of FiduciaryNews.com, Christopher Carosa, recently delivered an interesting article for BenefitsPro. The article looks at math anxiety and the plan sponsors’ role in helping assuage it. Here is the challenge – plan sponsors might not even realize that relieving math anxiety is part of their job description! However, Carosa opines, it falls to plan sponsors to take on at least some of the responsibility. Just as when resolving any issue, the first step is awareness. Sponsors should consider this the wake-up call. Your plan participants are anxious about numbers, and that anxiety is presenting a sizable barrier to their retirement readiness. What’s more, participants need your help to make sense of it all.
Math anxiety is a strong emotional feeling that people have about their ability to understand and do mathematics and it can be a contributing factor to financial illiteracy. In a sense, workers are like ostriches, burying their heads in the sand. Some people feel that if they fail to deal with math anxiety, maybe it will just go away. Sadly, it does not always work like that. In fact, financial illiteracy translates to sub-par retirement savings habits. On top of that, plan sponsors don’t seem to have the highest expectations of their participants when it comes to retirement planning. According to Mr. Carosa, “… perhaps plan sponsors’ low expectations of plan participants encourage poor decisions. Worse, regulatory policies promote this environment.”
Math anxiety may mean the difference between achieving retirement readiness or not. Plan sponsors should consider more involvement in helping employees to overcome their “fear of financial figures.” Math anxiety is more likely to drive employees to seek financial advice, and even take it. But it also opens plan participants up to potential fraud and deception, because this anxiety could also cause them to skip the all-important due diligence step in the advice-seeking process. In other words, workers may be so desperate for guidance that they make a poor decision in their choice of advisor. It is extraordinarily difficult to confirm trustworthiness through a vetting process. If math anxiety impacts one’s ability to perform due diligence, how, can employees find a trustworthy adviser for their retirement assets?”
This is where retirement plan sponsors should be stepping in to assist. It’s one thing to implement financial literacy programs. Those are important, and while we haven’t exactly seen financial education significantly move the needle on retirement readiness, that does not mean it does not or cannot. Financial education programs are relatively new, so the jury is still out on the effectiveness. But what if financial literacy was to be delivered by a knowledgeable advisor who could walk participants through the appropriate steps to identify their unique financial struggles and identify ways to overcome them? Retirement plan sponsors already have the fiduciary responsibility of selecting the providers for their retirement plan. Should plan sponsors help plan participants work through their math anxiety? Could this be accomplished by helping participants to also select a reputable, trustworthy advisor for the plan participant as well, in order to give participants more choice?