Retirement Plan Communications Should Eliminate Jargon by Steff Chalk
Retirement plan communications should make every effort to connect with the reader. This includes eliminating the jargon so the message can be understood. In order to be effective, retirement plan communications should be clear and simple-to-understand. We are now aware that the use of jargon in retirement plan communications makes them less effective. It is best to adhere to that old adage: keep it simple. So, it is surprising to learn, more jargon is sneaking into retirement plan communications than we realize. It may be time for plan sponsors, service providers and even advisors to take a closer look at their retirement plan communications materials and see where they can simplify and dump-the-jargon to foster better understanding and engagement among participants.
Empower Retirement recently released a white paper on this very topic, titled “Boosting the effectiveness of retirement plan communication.” The paper opines that avoiding jargon where possible and delivering communications via channels that participants desire are the keys to helping get employees on the right track to better retirements.
According to the Empower white paper, so-called “safe” words that participants understand include contribution, enroll and rollover. However, commonly used jargon can be better understood with small revisions, i.e., employer match instead of match. In addition, the Empower paper revealed, participants prefer to receive retirement plan communications via their personal email over all other communication methods.
In a series of surveys and focus groups conducted in 2017-18, Empower found that much of the industry jargon used consistently in retirement plan communications doesn’t resonate, and isn’t understood by, participants. Surprisingly,66% of respondents said they did not understand what “rebalancing investments” means, and 69% were not sure what asset allocation is all about. Even more, telling is that of all demographics, millennials struggle the most with understanding financial terms. This is consistent with academic research, which shows that younger generations scored the lowest on objective and subjective financial literacy tests, according to Empower. For example, 63% of millennial respondents were confused by the term “plan participant” vs. 44% of total respondents.
Here’s a visual breakdown from Empower that shows how millennials’ comprehension of potentially confusing retirement plan terms stacked up against other respondents’:
communications That said, it’s no secret that, in many cases, retirement plan communications could use a re-do in the jargon department. Plan participants used the following words when describing to Empower the type of retirement plan communications they desired:
- Simple/Easy to understand
- Personalized Engaging/Attention-grabbing
Moreover, the Empower paper reminds us that no matter how well the message is constructed, or how free of jargon it may be, it’s useless if it doesn’t reach and connect with its intended audience. As mentioned above, most employees indicated a preference to receive retirement plan communications via their personal email. Just 26% said that work email was a preferred method to receive retirement plan communications. Empower notes that employees may prefer to receive retirement plan communications in their personal inbox because it is already home to other financial-related communications they receive, such as bank statements. Empower notes “Receiving plan information in the same place may make it easier for employees to think about their household finances, including retirement, in a holistic manner.”
There’s no doubt about it, financial concepts are complex, and oftentimes challenging for retirement plan participants to understand and digest. The key to effective retirement plan communications is less jargon and greater simplification, and of course, delivering those messages in a method preferred by the target audience. As Empower points out, the stakes are high for employees who are choosing savings strategies to make sure they will amass sufficient funds to live during retirement. As such, it’s imperative for plan sponsors and service providers to understand how to optimize retirement plan communications to deliver key concepts and strategies with maximum effectiveness.
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