To Drive Engagement and Improve Retirement Readiness, Plan Sponsors Need to Meet Participants Where They Are

The early 2020s will be remembered for seismic shifts in the economy and workplaces. COVID-19 drove long-term changes to our lifestyles and the way we work, and while the economy has recovered and remained strong in many areas, high inflation continues to pose challenges for the average worker. These dynamics have placed a renewed importance on financial stability for workers, and that raises the bar for plan sponsors to be responsive.

In 2023, we saw a few distinct trends from participants indicating they are seeking out more education and investment advice to feel more financially secure. Participant attendance at educational sessions about 401(k) plans and other financial topics was up 19% overall from the previous year, according to data from Schwab Retirement Plan Services (SRPS). Participants are asking for more professional support with their retirement accounts, too. Enrollment in managed accounts increased 9% in 2023.

This momentum is encouraging, but there’s more work we can do to drive engagement with retirement planning even higher.

Workshops That Go Beyond the Basics 

SRPS data show that plan sponsors have gravitated toward offering education workshops about plan-specific topics, such as choosing between traditional and Roth contributions, or evaluating in-plan Roth conversions, for example. This is especially true for onsite sessions. While these types of sessions are important to educate participants about the options you offer to help them achieve retirement goals, they also tend to garner lower attendance.

Our results show that participants overwhelmingly prefer workshops on holistic financial wellness topics, such as debt management, budgeting, and spending. Attendance at these sessions is 320% higher than sessions on plan-specific content.

Imagine what could be accomplished by leaning further into what participants are asking for. If participants are interested in financial wellness, you should tap in and offer more opportunities to learn about building and maintaining healthy financial habits. Attendance at education sessions, virtual or in-person, drives engagement and creates more opportunities to connect with participants on both plan-specific and broad-based financial topics.

It’s Always a Balancing Act … But Especially Now

Understandably, workers have struggled to stay on top of savings and keep up with expenses while facing inflation and stock market volatility. Hardship withdrawals and loans were up 29% and 19% respectively last year, according to our data. Despite more participants tapping into 401(k)s, savings behavior remains a bright spot. In 2023, 90% of participants increased or maintained contribution rates, consistent with what we saw in 2022.

Against this backdrop, the importance of education goes up. For many participants, financial planning is, at best, time-consuming and, at worst, overwhelming and intimidating. But education can’t be limited to explaining the mechanics of the 401(k) plan. Participants are telling us they need guidance on budgeting, debt management, savings and investment strategies, and managing financial stress.

Expanding your education offering to cover these topics more often could curb early 401(k) withdrawals. If participants learn how to build an emergency fund to cover unplanned expenses, they’re more likely to leave their 401(k)s untapped, for example. Additionally, we know that professional help builds financial confidence in retirement savers. Just over a quarter of workers in our annual 401(k) survey told us they are very confident making 401(k) investment decisions on their own, but that confidence level nearly doubles with professional guidance.

Plan sponsors can work with retirement plan providers in these areas to steer participants toward a more secure retirement.

Education 2.0

Adding financial wellness topics to your education track does not diminish the need for and importance of plan-specific education, of course. In fact, with the advent of the SECURE 2.0 Act of 2022, plan-specific education is arguably more important than ever.

While SECURE 2.0 is intended to help workers prepare for retirement, research shows participants need guidance to navigate new benefits.

Our 401(k) survey found that just over half of participants have heard of the new law, and separate data from SRPS show that many plan sponsors are considering or have already begun implementing certain optional provisions like qualified disaster relief, domestic abuse victim withdrawals, and Roth employer contributions. We expect employers to continue exploring and adopting these provisions, generating the need for more participant education.

A Focus on Outcomes

Adopting a more holistic approach to participant education that balances plan-specific workshops and financial wellness topics can help plan sponsors drive engagement and empower participants to take control of their financial futures as they work to achieve greater security in retirement.

Workplace financial benefits programs that meet employees where they are can lead to greater loyalty and trust, helping you attract and retain the talent you need to advance your firm’s goals.

Lee McAdoo is managing director of Schwab Retirement Plan Services, supporting employers and their employees with their overall retirement planning needs. McAdoo has been in the financial services industry since 2005 and with Schwab since 2021. She has held a variety of positions throughout her career including roles in strategy, marketing, sales and service, trading, finance, and investor education.

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of ISS Stoxx or its affiliates.