How to Communicate With Your Plan Participants Right Now

With ongoing market volatility and increasing chatter about a potential bear market, some retirement savers may be feeling more anxious about their investments than they have in the recent past.

The average retirement account balances declined 6% from the fourth quarter of 2021 to the first quarter of 2022, according to Fidelity. So far, Fidelity finds, most participants have chosen to stay the course, with just 5.6% making changes to their asset allocation in the last quarter.

For plan sponsors, the recent economic turmoil is an opportunity to connect with plan participants to educate them on the current markets and the best moves for their financial security, says Stuart Robinson, CEO of ShareBuilder Advisors.

“The overarching theme of successfully planning retirement is staying the course,” says Christopher Dall, vice president, senior product leader at PNC Institutional Asset Management. “Retirement investing is a long-term goal, and fluctuations in the market are going to occur throughout the years, but what matters most is how much the account is worth at retirement, not how much it changes this week.”

Still, Dall concedes that such advice is easier to give than to follow when markets are gyrating wildly.

“Even a professional investor with an understanding of market volatility is lying if they say they’re not stressed when markets are down,” he says. “It’s hard for employees, especially those who are close to retirement and who might see market volatility as the reason they can’t retire this year.”

The extent to which recent declines—or potential greater losses going forward—concern individual participants depends on factors such as their risk tolerance, their other financial assets and the amount of time they have until retirement.

If there are advice call centers or other financial wellness options that can provide advice tailored to participants’ individual situations, plan sponsors may want to highlight them to all participants, along with general messaging about the importance of focusing on long-term goals. But they can also tailor their message to segments of the plan populations, based on age or other factors.

“Plan sponsors and providers shouldn’t wait for market turmoil to hit,” says Raymond Bellucci, senior managing director and regional general manager with TIAA. “We should be communicating regularly with plan participants and focusing on both their short-term and long-term plans.”

Experts say that using in-person and virtual one-on-one consultations and communicating across different media, including text messaging and email, can reach the broadest swath of participants. Messaging should use plain language that even those without a financial background can easily understand. Here’s a look at how communications might vary, depending on a participant’s age and time until retirement.

For the Younger Employees (15 Years or More From Retirement)

Employees with a decade or more to go until retirement have the least to worry about when it comes to the long-term impact of stock market volatility. But, given recent historic market performance, they may have never experienced a down market, aside from the brief COVID-19 downturn in spring 2020.

Messaging to this group should frame volatility as a normal part of the market—and one necessary to deliver long-term returns. Share data looking at previous downturns and the subsequent market recoveries, and explain how those who pulled out of the market after selloff missed the upside. For most participants, keeping their money in the market and continuing to invest over time is the best way to secure their financial future.

“Millennials are very receptive to data,” says Chad Olson, a financial adviser with SageView Advisory Group. “I also try to impress upon them that they should be looking at this as a positive, rather than a negative. This is a chance to buy equities that are 20% discounted from January. “

For Middle-Aged Workers (10 to 15 Years From Retirement)

These workers also likely have enough time before retirement to recover from short-term dips in the market. The goal for this group may be on maxing out their contributions, including via catch-up provisions if they’re behind on their retirement savings.

“For this group, I’d be focusing on replacement income and dialing in on that number and using calculators available to see whether they’re on track to have the retirement income to do the things that they want to do in retirement,” Dall says. “That becomes more relevant for mid-career employees.”

For Near-Retirees (5 Years From Retirement)

Those with a shorter time horizon until they either stop contributing to or need to start drawing down their nest egg may have heightened sensitivity to negative returns. If the plan offers lifetime income investments, this might be an opportunity to highlight those options and the protection that they can offer, Bellucci says.

For those with participants in a target-date fund or some other qualified default alternative, communications might focus on how these funds take long-term market volatility into account and offer some protection, although evolving glide paths have many target-date funds more heavily tilted toward equities than they were a decade ago.

This group also benefits from one-on-one conversations tailored to their personal situations, says Olson, who often consults with plan participants about their financial picture.

“If you have three 60-year-olds, they’re going to all have different situations,” Olson says. “A lot of times they just want reassurance, even just a five-minute conversation, that they’re OK.”

For Recent Retirees

A full seven in 10 employers are concerned about the impact of market volatility on their retirees, according to a recent MetLife study. For these participants, inflation may also be a significant concern, as the erosion of their purchasing power can create an obstacle to their retirement security.

Those in the decumulation phase may face more complicated decisions than those still saving for retirement, so this may be an opportunity for plans that offer education or advice to urge retirees to take advantage of those benefits. For retirees who are not in a managed portfolio, plan sponsors might direct them to tools that help them understand their asset allocation and create a plan that will offer them the most downside protection.

“If you’re nervous and freaking out about market volatility, it might be time to look at your asset allocation and investments and consider whether you’re too risky,” Robinson says. “It might be time to see whether there’s another portfolio that’s a better fit for you and will let you sleep at night.”