New Study Examines Motivations for Plan Engagement

The Defined Contribution Institutional Investment Association’s Retirement Research Center has published an update to previous research on the relative effectiveness of fear-based and encouraging messaging in motivating defined contribution plan participants to engage more in their plan.

In July 2021, DCIIA published research that tested the relative effectiveness of fear-based (sometimes referred to as cautionary) messaging versus encouraging messaging in getting plan participants to act on behalf of their own retirement. The 2021 study argued that motivating recipients to engage is an important measure of the success of the plan, and demonstrated that while encouraging and cautionary messaging both work, cautionary messaging is more effective.

Respondents were asked seven questions to gauge their baseline engagement in their plan. Then they were shown either a cautionary message that warned that they were short of their retirement goal or an encouraging message that congratulated them for being within range, though still short, of their goal.

The cautionary message triggered consistently higher engagement when the seven questions were asked again than the encouraging one. However, the researchers argued that too much fear can be counterproductive since it can make a recipient’s retirement goal seem impossible to reach, which could discourage engagement.

A follow-up DCIIA study released this week looked at 1,500 people in the Indiana Public Retirement System. Some were sent an email with an encouraging message, and the rest received an email with a cautionary one. They then counted the number of email recipients who opened the email at once, and then the number that logged in to their account.

The study found that 39% of those who received an encouraging message opened their email, versus 34% of those who received a cautionary email. Of those who were encouraged, 21% went on to log in to their account, whereas 12% of those cautioned did so.

The study did not track what those respondents did after logging in, nor ask them what precisely motivated them to do so, so it is not clear to what degree they actually “engaged,” or what form that engagement took. This is unlike the previous study, which examined seven specific forms of engagement, such as whether they would be more likely to speak with a financial professional.

The study says DCIIA’s past work in an experimental or “theoretical” setting showed that cautionary messaging was more motivating for plan engagement, whereas encouraging messaging was more motivating in a “real-world” setting.

One possible criticism of this interpretation is that the second study considered relatively superficial actions such as clicking on an email and then logging into an account as plan engagement, whereas the first considered seven more active and nuanced methods of engagement, such as looking carefully at one’s retirement income statement.

The study concludes by recommending varied and creative communication to encourage engagement