Participants and plan sponsors might not be humming the Pharrell Williams tune "Happy", but they could listen to the song that has reached #1 in two dozen countries and check out their retirement plan on their mobile devices. The growing importance of accessing retirement plans via iPhones, iPads, Androids, and other mobile devices is made clear in a report by Deloitte. According to the Annual Defined Contribution Benchmarking Survey (2013-2014 Edition), nearly two-thirds (64%) of plan sponsors are either satisfied or very satisfied with interacting with their recordkeeper via mobile apps. What's more, in just two years, from 2011 to 2013, participant interaction with the recordkeeper has increased from roughly one in ten (11%) to nearly one in three (31%). Plan sponsors project that six in ten (61%) participants are satisfied or very satisfied with mobile access to the recordkeeper. The impact of social media and instant chat tools are less certain, with plan sponsors for the most part saying that participants are neither satisfied nor dissatisfied (37% for social media, 29% for instant chat); an additional 51% are classified as "not available" for both social media and chat. When it comes to transaction processing via mobile devices, the glass is only half-full and somewhat behind other segments of financial services. Only 53% of plan sponsors currently support this, but additional growth is expected (16% of plan sponsors in the next two years), so nearly seven in ten (69%) will provide this mobile support.
Smartphones and tablets are relatively lightweight compared to laptops and desktop computers. People love having access to the information they want when they want it. Mobile devices enable this to happen. It helps explain their phenomenal success in less than a decade. While mobile devices can be a distraction with all of the apps that are available, they are amazing for the scope of what they can do. That is why plan sponsors and participants as well are clamoring for even greater mobile access.
The Spectrem Group's Millionaire's Corner has released highlights of a study that looks at how retirement plan participants access their accounts. I think the main takeaway is that participants will use the method that is most convenient. If they are working in front of a PC or Mac, that will be a primary tool -- at or near 80% across all demographic groups. Most, of course, are always near their iPhone or other smartphone, so that is used by a vast majority as well. Tablets (including e-readers) have become very popular, but they are not quite as universal as smartphones, so while the usage numbers are strong, they are not as high as for smartphones or PC's/Mac's. By the numbers, here are Spectrem's highlights:
The last decade has been nothing short of phenomenal in how mobile technology has transformed how we access information. It wasn't so long ago that a participant had to call a customer service center and listen to a menu of voice prompts to get account information. The incredible popularity of smartphones and other mobile technology has enabled participants to easily access account information 24/7.
An ongoing theme of this blog has been that retirement savings does not occur in a vacuum. To quote John Lennon, "Life is what happens to you while you're busy making other plans." Most people would readily agree that saving for retirement is a very important goal, but for most people, it is not the only goal. Sometimes challenging circumstances get in the way and difficult choices are made - a family member faces health challenges, a natural disaster results in extraordinary expenses, a return to employment after a layoff takes longer than expected, the value of housing plummets precipitously, and more. Saving for retirement takes a back seat to the more immediate financial challenge. Perhaps a participant takes out a 401(k) loan. Or a distribution is taken early to address current challenges. The tax code arguably is designed to keep participants on track for a more secure retirement, but its early withdrawal penalties may make it more difficult for individuals and families just when they need help the most. In an earlier blog post, I modestly suggested that legislation that would add certified financial challenges to the list of exceptions to the 10% early distribution penalty, while simultaneously encouraging repayment of borrowed funds as soon as the hardship is over, would go a long way to getting or keeping families on a better financial path for themselves and for the economy as a whole. If participants are contributing more because they know that they will still have access to their accounts, then if they are never laid off, their existing accounts will have grown very substantially, probably significantly more than is now the case for most.
This brings us to an important finding from a study prepared by New York Life, along with Greenwald & Associates. It recognizes that saving for retirement is part of the holistic view of personal finance. In essence, savings do not occur in a vacuum. The study posits that retirement providers need to understand this premise if they are to effectively help participants: "Simply focusing on retirement planning in our participant education and engagement strategies ignores the complexities of an individual's financial life - and rings hollow and incomplete." The report takes it a step further with this call to action: "To successfully empower individuals to save for retirement, it is imperative that we need tools and advice to support the broad spectrum of their financial lives."
Why does this matter so much? According to the report:
New York Life recommends a holistic approach that helps individuals navigate the various financial challenges. I would take it a step further and have it change according to the needs of the individual. For example, if there is a job loss or unexpected expense, what are the best options for moving forward? How do you face current hurdles alongside future goals?
Blog Author - Ken Felsher
With over 25 years of writing, editing, and research experience. I enjoy sharing with my readers my love of working with content on a variety of subjects.