Retirement Technology Enhances How Americans Save
Technology is infiltrating the financial services industry, and it’s changing the way people plan, save and think about retirement. Retirement technology is currently in a technological revolution in both retirement and financial planning spaces. Growing numbers of Americans are embracing online and digital platforms to manage their financial lives.
\Angela Antonelli, research professor and the executive director of the Center for Retirement Initiatives (CRI) at Georgetown University’s McCourt School of Public Policy, recently wrote a compelling article in Forbes on how technology is changing the way Americans plan and prepare for retirement. We have witnessed “techno-creep” into the industry for several years, however, Ms. Antonelli’s piece shines a spotlight on just how pervasive retirement technology has become in helping workers grow their nest eggs for the future.
She aptly points out that auto-enrollment, automatic payroll deductions, and target date funds are now standard features in most workplace retirement plans, particularly for larger plans. In fact, a recent survey from the Defined Contribution Institutional Investment Association (DCIIA) found that two-thirds (66%) of large plans (those with assets of $200 million or more) use automatic enrollment, compared to 51% of small plans (those with assets of less than $200 million). Thus, smaller plans will likely continue to embrace technology solutions, fueling the growth of auto features in retirement plans moving forward.
Moreover, more people are using mobile apps to track their investments, along with online tools for budgeting and financial planning. According to Ms. Antonelli, all of these technological advancements increase participation by making it easier for people to save and invest for retirement. “Technology demystifies retirement investing, and simplifies the process, making savings much easier,” she writes.
Retirement technology innovations come with vulnerability. And with that vulnerability, comes fear. Today’s headlines are full of retirement technology stories of cyber attacks and hackers preying on the unsuspecting user. Cybersecurity is a huge concern, and as Ms. Antonelli points out, the financial services industry must find ways to reassure individuals that their financial data and personal information are secure.
Trust, or lack thereof, is another factor that enters the retirement technology conversation. Ms. Antonelli cites research from Mercer, which discovered that nearly half (49%) of Americans fear having their financial data shared with others if they use technology for financial planning. It is important for users to feel comfortable, as the sharing of confidential financial details is necessary for financial professionals and providers to make appropriate recommendations for savings and investment options. Not surprisingly, Millennials — the first “digital native” generation — have embraced technology more than their parents. Fully 73% of individuals age 18 to 34 are willing to buy financial products from technology companies, compared to 42% of people age 55 and older, according to a Bain & Company report cited by Ms. Antonelli.
In addition, Ms. Antonelli writes “Artificial intelligence, machine learning, and other uses of Big Data can help improve investment returns and allow retirees to have more cash available to sustain a desired quality of life after they leave the workforce.” Moreover, sophisticated data allows for more personalization to be baked in to financial planning and retirement advice. By accounting for individuals’ unique financial circumstances and goals, retirement technology can “foster greater engagement in retirement savings planning while simplifying the options to improve decision-making,” according to Ms. Antonelli.
Online education and planning tools are available for individuals who are seeking support and quality advice. According to Mercer, 85% of people have an interest in online financial tools, and they want their employers to help provide it. Clearly, this is a tremendous opportunity for plan sponsors to expand their offerings and provide workers with access to more sophisticated, retirement technology financial planning tools. In fact, organizations that use technology to engage their workforces are 60% more likely to have increased employee engagement with their benefits programs, according to the Thomson Benefits Online study Ms. Antonelli’s cites.
Of course, retirement technology alone is not the sole solution for America’s retirement savings crisis. Providers and policymakers must address concerns about cybersecurity and privacy. Fortunately, retirement technology is changing the retirement landscape for the better. Going forward, retirement technology will continue to help provide access to better advice and more targeted recommendations for millions of Americans, thus improving retirement outcomes across the board.
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