Proactive strategies to help redefine employer-sponsored retirement plans in a new reality

It’s not hard to see the need for a fresh approach to helping employees save for retirement amid new and emerging challenges. Inconsistent wage growth, recent periods of high inflation and market volatility are making it tough to succeed with only traditional approaches.

In short, the old "set-it-and-forget-it" mentality just isn’t cutting it anymore. 

Proactive plan sponsors that help employees grow their retirement savings stand to become employers of choice in a competitive market for talent — and the financial professionals serving their plans stand to benefit, too.

But proactivity isn’t just a theoretical concept:

A proactive approach means implementing real-life, actionable steps to help everyone involved navigate the complexities of the current financial landscape.

Here, we’ll explore specific, actionable steps that can help move the needle for plan participants.

Improving enrollment and optimizing contribution rates

Plans will soon be required to include auto-enrollment and auto-escalation features. The requirement is intended to help Americans overcome inertia and inaction so they simply get started contributing to retirement savings.

And if you’re not convinced that employees need more help getting started and increasing their contributions, consider that the average U.S. retirement savings is under $90,000.¹ And financial uncertainty isn’t inspiring action:

Of the 60% of respondents who said they’re postponing purchases or investments out of uncertainty, 10% said they were putting off 401k plan participation, or starting a similar retirement savings plan.¹

Monitoring plans closely and including participant-friendly investment options like target date funds are both important, but there’s more that can be done. Consider how these strategies may fit into your plan:

1. Regular portfolio reviews

Periodic reviews can streamline and simplify aligning portfolios and plan offerings with changing market conditions and diverse individuals’ retirement goals. Regular reviews create opportunities to learn more about participants’ personal and financial circumstances. This can help address challenges and concerns before they become major problems that impact the ability to retire with confidence.

2. Thematic investments 

Plans that offer investment options in emerging sectors like digitization and renewable energy may offer promising long-term growth prospects — and they may also help appeal to a broader range of participants’ investment interests. For participants interested in more novel investments, thematic investment choices can “scratch the itch” with vetted options, possibly helping them avoid riskier investments they may encounter on their own.

3. Client communication

Clear, easy-to-understand and consistent plan updates, as well as regular opportunities for consultations, do more than help participants make adjustments. They can also open a window to insights into changing needs, allowing for more agile adjustments to the plan and/or investment options.

4. Financial education programming

Offering workshops and/or self-serve educational resources can help empower plan participants to make informed decisions, enhancing their sense of financial wellness and retirement security. Consider a wide range of formats, from in-person lunch-and-learn presentations to bite-size videos covering simple topics, such as simplifying investment terminology.

5. Scenario planning

Running a range of economic scenarios can help prepare both sponsors and participants for varying market conditions, helping them make more informed decisions when the need arises. Plan advisors can invite participants for face-to-face consultations — in-person or virtual — to demonstrate multiple scenarios and walk through their implications.

6. Automated alerts

Technology that sends automated alerts in the case of major market changes or portfolio imbalances can encourage timely action and reduce lagging responses. This can encourage participants to be more engaged in their planning and investment decisions, and it may even help them feel more confident as they face changing conditions.

Adapting retirement plans to meet changing needs in a complex, dynamic financial environment

The choices plan sponsors make today may have long-lasting implications. Building agility and adaptability into a retirement plan isn’t merely a competitive advantage; it’s a necessity. Plan professionals and sponsors who are willing and able to pivot stand to help employees meet their financial objectives in retirement.

Adopting a proactive approach can offer a triple win. It can:

• Enhance financial wellness for plan participants.
• Help plan sponsors manage risk and compliance.
• Provide financial professionals with new ways to differentiate their services in a crowded and competitive marketplace.

By shifting from a "set-it-and-forget-it" mentality to an engaged, proactive approach, plan sponsors and professionals can offer more than just transactional interactions — they can build enduring relationships and deliver meaningful value.

SOURCES
¹ Northwestern Mutual, 2023 Planning and Progress Study: The Financial States of America, 2023.

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