How Plan Sponsors Can Tap into the Power of the 5 Second Rule. Currently, I’m listening to the audio version of Mel Robbins’ book, “The 5 Second Rule: Transform Your Life, Work, and Confidence with Everyday Courage.” In a nutshell, Robbins’ message is that we can drastically change our lives and push ourselves to do amazing things simply by making a series of small, consistent, 5-second decisions every day. In other words, small steps today could add up to great outcomes down the road. (If you don’t know who Mel Robbins is, she’s an author, speaker, and former radio talk show host, probably best known for her 2011 San Francisco TedX talk, which you can watch.)
‘Sound familiar? We talk about the power of small steps a lot in the retirement industry, particularly with regard to how we communicate the benefits of employer-sponsored retirement plans, and how they can help workers prepare for a better tomorrow. “Start saving a little for retirement today; it’ll add up over time.” “Put your money to work for you; it’ll grow through the magic of compounding.” “Increase your contributions by small percentages over time and watch your retirement savings add up.”
It’s all a series of small steps, and really, none of them takes much effort. So why then, do workers have so much resistance to actually taking those steps? Here’s the answer — another pearl of wisdom Robbins drops in The 5 Second Rule (I’m paraphrasing a bit): “You know exactly what you have to do. You just don’t want to do it.”
She cites an example where, several years ago, she hit the snooze alarm repeatedly before getting out of bed. This was at a period in her life where she was basically at rock bottom – she was unemployed, her husband’s restaurant business was failing, there was a lien on their house, she was drinking way too much. She woke up every day full of dread, her head swirling with those negative thoughts, and all she wanted to do was go back to sleep so she could escape the nightmare of her life. She knew what she had to do: get up on time, look for a job, quit blaming her husband for all their problems, and stop drinking so much.
That’s when she discovered the 5 Second Rule, and first used it to help her get out of bed in the morning, then to improve myriad other parts of her life. Now she’s a highly sought-after motivational speaker, a renowned author, she’s earning more money than she ever could have imagined, and she’s successful beyond her wildest dreams. She dug out of the black hole she was in, and the 5 Second Rule has worked for thousands of people who’ve read Robbins’ book as well. As she says, “it’s as simple as counting 5-4-3-2-1, then taking action.”
It’s the same thing with saving for retirement – workers know what they have to do. They just don’t want to do it. And they keep hitting the “snooze button” and telling themselves they’ll get around to saving for retirement later. But they never do. And again, it’s a series of small steps that will help them achieve the outcomes they want. But it all starts with a single step, which is choosing to save in the first place. And obviously, if workers aren’t making that one critical decision, they can’t make any of the others that come after it to get them to the retirement outcomes they desire. And so they are doomed to failure before they even begin.
The industry has come a long way in combatting inertia by taking most of the decision-making out of workers’ hands with plan design features like auto enrollment and automatic contribution escalation. According to thisfrom the AARP, which cites a recent survey from Alight Solutions, 68% of large US employers automatically enrolled employees in 401(k) plans as of October 2017. And a third of employers who responded to that same survey said they enrolled participants at a 6% deferral rate — double the average of 3%.
So important work is being done, and much of the “decision fatigue” is being eliminated from the enrollment and deferral processes. Great progress, to be sure. That said, it’s only the tip of the so-called iceberg. We know that Americans are still woefully undersaved for retirement, to the tune of $6.8 to $14 trillion, according to afrom the National Institute on Retirement Security using data from the Federal Reserve. Those are some frightening figures, and if they’re anywhere near accurate, well, we’ve got a long way to go, baby.
Here’s the thing: the choice to save, and the decision to save enough, is within every American’s control. But so is the decision not to, or to not save enough, and sadly, the latter is the one many have made.
In part, it comes down to sending a message of empowerment in employee communications about the plan. Sure, education is important, and if you’re doing it — and plan sponsors should be — keep doing it. But it’s also a matter of helping workers understand “hey, it’s your future, and you have the opportunity and the option to make it a really great one. And by the way, you have complete control over your destiny. All you have to do is take these series of small steps and commit to continue doing them.”
It’s so simple (and yes, I’m over-simplifying it). Robbins says the 5 Second Rule is simple, too. But it’s not easy, she cautions. You still have to do the work to get the results. But like manifesting success in life, creating a secure, comfortable retirement is simply a matter of making a commitment to a goal, putting in the effort, and taking a series of small, consistent steps to achieve it. The secret is getting people to actually take those steps, something so many of us resist because it’s hard, or because we’re afraid, or because some of us just don’t know where to begin.
And that’s where you come in. Plan sponsors have more power than you think. Sure, you can’t actually “make” your employees save for retirement. You can only nudge, encourage, remind, and educate them on the importance of doing so. Still, that’s a pretty important job. You get to be the sherpa on your employees’ journey to the retirement they’re working so hard for. And you have the honor of helping them get there, one small step — or one 5-second decision — at a time. Are you up to the challenge?
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