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“Nudging” Employees May Improve Retirement Savings

Retirement Savings

“Nudging” Employees May Improve Retirement Savings: Good news for plan sponsors — you can help persuade older employees to save more for retirement with just a little “nudge.”

That’s according to the findings in a working paper from the National Bureau of Economic Research, cited in the Wall Street Journal. The paper details the results of an experiment conducted in 2014. The study included more than 14,000 active employees ages 50-69. This demographic was studied because it’s a generation that tends to be more “set in its ways and harder to nudge.”

The results showed that workers who received email nudges were more likely to increase their contributions. Some upped their deferrals by 2.8%, compared to 1.8% for the control group. That’s a significant change, all from an email — a fairly simple, easy-to-execute —and low-budget — communications tactic.

The research builds on earlier studies that show how nudging people — like patients managing chronic diseases — can change their behaviors.

The findings are encouraging because it means employers can have an impact on helping encourage retirement readiness beyond offering savings plans as part of a well-rounded benefits package.

It also means that well-timed communications can potentially move the needle on savings behaviors. The research shows it works for older employees; it may make an impact on younger generations, too.

For example, reaching out to employees of all ages when they’ve received a raise or promotion and encouraging them to increase their retirement savings may prompt them to set aside extra dollars that they may not have otherwise. Many simply don’t think to save more money in their retirement accounts when they reach significant career milestones — again, those well-timed communications may be just the nudge they need.

And since touch points around these key milestones are likely already built in to your participant communications program — or should be — it’s a no-brainer to nudge employees young and older at opportune intervals. After all, it seems a timely nudge can make all the difference when it comes to improving retirement savings behaviors.

Robyn Kurdek

Robyn Kurdek

Freelance writer with nearly 2 decades of financial industry experience, with niche expertise in the defined contribution (DC) industry. I also have defined benefit (DB) plan knowledge. I write all types of content for retirement plan participants, sponsors and advisors, including web copy, newsletters, white papers, fact sheets, blog posts, financial wellness articles, and more. "I speak DC."
Robyn Kurdek

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