Words Make All the Difference in Improving Participation and Outcomes

Canadian philosopher and media theorist Marshall McLuhan is famous for coining the phrase, “The medium is the message.”  His iconic observation suggested that the form in which is a message is conveyed will determine how it’s perceived.  That has applications in the world of retirement plan benefits, where language matters.  Literally, the words you use when crafting your retirement plan communications can make all the difference in boosting participation and improving plan outcomes.

Invesco’s 2024 Defined Contribution Participant Pulse Survey, cited in BenefitsPro, revealed key insights into how plan participants perceive and engage with workplace retirement plans.  For employers and retirement plan advisors, understanding participants’ language preferences is key to boosting participation and helping employees achieve their retirement goals.

The survey uncovered several interesting trends:

1. Financial security over freedom: 68% of participants prioritize “financial security” over “financial freedom” (32%) in retirement, indicating a desire for a stable financial foundation.
2. Goal-based investment strategies: Twice as many participants prefer goal-based investment strategies (52%) compared to those focused on risk tolerance (26%) or retirement year (22%).
3. Retirement income options: Over half of the respondents (54%) said having access to a monthly payout feature would make them more likely to keep money in their employer’s plan after retiring.

Greg Jenkins, Managing Director and Head of DC Institutional Sales at Invesco, who was quoted in the BenefitsPro article, emphasized the importance of language: “Using the right language can help inspire and motivate participants to save while the wrong language can cause confusion and lead to disengagement.  A good example of this is the use of industry jargon.”

Here are some key language preferences revealed by the Invesco survey:

– “Risk reduction path” instead of “glide path”

– “Investment income” over “nest egg”

– “Flexibility for short-term needs” rather than “liquidity”

– Emphasize the employer’s ability to “negotiate lower fees” over access to exclusive investment options

While some concepts appeal universally (e.g., “growth”), the survey found that different generations have unique preferences:

– Older participants focus more on cost efficiency

– Millennials value convenience and personalization

– Younger participants have a non-traditional view of retirement, emphasizing freedom to pursue life goals

Here are some key takeaways for plan sponsors and retirement plan advisors:

1. Avoid jargon: Industry-specific terms can confuse participants.  Use clear, simple language.
2. Emphasize flexibility and cost: Participants value flexibility in retirement income programs and are sensitive to costs, especially when presented in dollar terms.
3. Focus on goals: Shift from risk-based to goal-based investment strategies in your communications.
4. Highlight financial security: Frame retirement planning as a path to financial security rather than unlimited freedom.
5. Personalize communication: Tailor your message to different age groups, addressing their specific concerns and values.
6. Showcase value: Emphasize how the plan negotiates lower fees and provides cost-effective options for participants.

By implementing these communication strategies, retirement plan sponsors and advisors can better engage participants, increase plan participation, and ultimately help employees achieve their retirement goals.  In the world of retirement planning, the right words really can make all the difference.