SURVEY SAYS: Why Aren't Participants Doing More?

This week, we asked readers to offer an opinion as to why – and we only let them pick ONE reason, though the reasons are perhaps as myriad as the participants we are trying to reach.   And then things got “interesting.”

The most common answer – despite 20+years and goodness knows how many dollars – was a lack of knowledge, cited by nearly 30%.   The frustration level of many readers was evident, including the reader who observed, “(c) Lack of Knowledge: a nice way to put it, especially after you have explained to them that they may live to be 95; that social security and the pension plan will not be enough; the company match is dollar of dollar up to 3.5%; their money and company match is in their account the next week; they have 13 different investment options; and they walk out without signing up.”   Another noted, “Because they don’t know what they don’t know, the task to learn seems overwhelming.”   Or there was the reader who said, “And why aren’t they knowledgeable?  Because they do not attend the educational meetings or read the information sent to them.  Grrrrrrrr!”

A close second – more than 24% chose it – was a lack of interest which, as frustrating as the first response might be, is potentially more disconcerting.   As one reader noted, “I believe it is (b) lack of interest. Some pretty good tools are out there now, and they don’t take a great deal of time to use.”

Nearly 15% said the problem was, believe it or not, no perceived need on the part of participants to take advantage of the tool.   One noted, “The closest answer is‘(f) no perceived need to use them.’ As suggested by the reminder about the webinar, many people are procrastinators. Retirement preparation is no different. Most people tend to be more focused on their immediate financial needs, while retirement is something that they will get to eventually.”

As for the remaining alternatives, about 8% said it was a lack of time (a number of readers confessed to this challenge, even on a personal note), while about 6% were scattered over the wrong tools, cost (though this seemed to be the cost of saving, not the cost of the tools), and a lack of access.   Yes, that’s right, providers – one reader offered an insightful reminder that some seem to overlook – “…over three-quarters of my participants have no access to the internet, and thusly lose out on a lot of the great tools that our provider offers them.   And since our management team is not interested in positioning kiosks in each of our facilities, it’s not likely that many of the participants will ever get the chance to explore.”

Of course, even given eight perfectly respectable choices, nearly one-in-five of this week’s respondents chose…”other.”   Specifically cited in this category were procrastination, apathy, fear, no perceived benefit in the tools, and a lack of trust.   One reader noted, “If the tools provided a source for funding the individual’s savings deficit then you could watch the lines form. As long as we tell them to save more of what they perceive that they do not have, we are wasting our time.”

Here’s a few more VERBATIMS:

“It is not that our educational materials are hard to use, it’s that participants are intimidated when they see all those blanks to fill in. Think form 1040 without penal sanctions.”

“Plan Sponsors & Participants view the Tools that are utilized within the 401k Investment Education & Planning industry to be TOO COMPLEX AND VERY TIME-CONSUMING.”  

“Younger participants don’t understand the need to plan for their retirement, and older participants think it’s too late to change course.   And some are afraid to find out ‘what they DON’T know.'”

“They intuitively know that financial planning would constrict their current consumption, so they don’t want to know.”

“Most education efforts, therefore, oversolve the problem for the motivated group — who probably get the information they need from other independent sources (other than sponsor or provider).”

One reader – perhaps “thwarted” from choosing “all of the above” (but only momentarily) creatively suggested,   lack of knowledge which leads to lack of interest, perceived lack of time, and the misunderstanding that they are too young (or ‘its too late’) to care.”

But this week’s Editor’s Choice goes to the reader who offered up one of the more arresting visualizations of the problem I have ever heard:   ” Based on my experience and 1,000’s of conversations with participants, I believe it’s (b) lack of interest.   All the other choices are just excuses that get you right back to ‘I just don’t give a rat’s snot ball!'”  

Thanks to everyone who participated in our survey!

I DON'T HAVE A CLUE.   I TAP DANCE MY 401K ROUTINE SEVERAL TIMES A YEAR.....I SHOW THEM VIDEOS......I CONSTANTLY PUT LITTLE REMINDERS IN OUR WEEKLY REPORT.

I AM ANXIOUSLY AWAITING THE RESPONSE TO THE SURVEY.   MAYBE THE CLOUDS WILL PART AND I WILL SEE......

Hey, it's only money.

I'd like to choose just one but I can't. After working with over 100,000 employees just in the last 5 years it is clear:

The stuff published for their use is not really usable or user-friendly. It is institutionally stiff and sterile and they don't trust it can solve their problems;

• Basic laziness prevents many people from accessing tools they believe will not be usable or understandable and which they are not convinced will help them;
• Until participants feel empowered by meaningful education and information, and believe they can succeed over the long term by harnessing basic and repeatable capital market behavior to build wealth, they will maintain a healthy mistrust of the "market" and those who try to "sell" it to them;
• Mutual fund company and insurance company disseminated "information" is self-serving and the average consumer is finally learning to suspect it;
• Participants are tired of brokers, on-line tool providers (Financial Engines), on-line information sources (Morningstar) always trying to sell them stuff - they are not "buying" anymore. They want personal and unbiased help to solve their financial problems and to show them how to meet future financial needs.

This is what we have heard from employees and plan participants. We ask, not sell and we hear what they are saying. The sales and distribution system of "plans" and "investments" is failing and has failed the participants and consumers. And the self-serving behavior of the largest sales organizations (like Merrill Lynch, Principal, and many others) have left participants with ill-designed, expensive, poorly performing plans and employees know it. This is one man's considered opinion but I believe it to reflect what I have learned in the field. - not at seminars and on the phone or from wholesalers.

Plan Sponsors & Participants view the Tools that that are utilized within the 401k Investment Education & Planning industry to be TOO COMPLEX AND VERY TIME-CONSUMING.   They do not have the time or the expertise to properly utilize them.   Plan Sponsors and Participants require SIMPLE & EFFICIENT Tools to help them with concepts such as Diversification, Asset Allocation, and overall Retirement Investment Education & Planning.  

I think that many people see complicated prospectuses, don't have the knowledge to read an income statement or balance sheet or the legal language that accompanies these documents, and they often lack math skills.   Intimidated by all of this, they end up confused and stay with their original choices.  

Younger participants don't understand the need to plan for their retirement and older participants think it's too late to change course.   And some are afraid to find out "what they DON'T know" -

"It's hard to contemplate and even try to grasp something that "might" benefit me in 30 years. Heck, I might not even make this month's mortgage payment because the   car needs a tuneup because I had to start buying the cheapest low octane gasoline when I go to the mimimart to buy the $3 gallon of milk and $4 pack of smokes and the $2 low carb candy bars ... Heck, the only thing that gets less interest than my savings account is my 401k.... Yep ... it's gotta be "b" ..... No Interest.

If I can only pick one, it would have to be A) Lack of time.   Having a six month old, it's hard for me to find time to do anything.   I've worked in the retirement industry most of my career, so managing my 401k is probably more of a priority for me than it would be for someone who doesn't deal with it on a day-to-day basis.   I'm sure there are things I don't do that others do as a matter of routine.

If people really wanted to financially plan for retirement   they would make the time to investigate all the available resources.   They intuitively know that financial planning would constrict their current consumption, so they don't want to know.

My vote is c) - lack of knowledge.   That accounts for lack of interest, no perceived need, etc.   Also accounts for the lack of urgency which is need to overcome inertia and actually make a positive move.

Thanks for asking - please be forthcoming with the answer!

(c) Lack of Knowledge: a nice way to put it, especially after you have explained to them that they may live to be 95. That social security and the pension plan will not be enough, the company match is dollar of dollar up to 3.5%, their money and company match is in their account the next week, they have 13 different investment options and they walk out without signing up.

I believe it is (b) lack of interest. Some pretty good tools are out there now, and they don't take   a great deal of time to use.

I would pick (h) lack of access because over three-quarters of my participants have no access to the internet, and thusly lose out on a lot of the great tools that our provider offers them.   And since our management team is not interested in positioning kiosks in each of our facilities, it's not likely that many of the participants will ever get the chance to explore.

Based on my experience and 1,000's of conversations with participants I believe it's (b) lack of interest.   All the other choices are just excuses that get you right back to "I just don't give a rat's snot ball!   Most folks simply don't plan much of anything, they allow life to happen to them and then later wonder what happened to all the years as well as the dreams they had leaving high school.   But that's just me!  

The closest answer is "(f) no perceived need to use them". As suggested by the reminder about the webinar, many people are procrastinators. Retirement preparation is no different. Most people tend to be more focused on their immediate financial needs, while retirement is something that they will get to eventually.

It is not that our educational materials are hard to use, it's that participants are intimidated when they see all those blanks to fill in. Think form 1040 without penal sanctions. It was in your quote for the day --   "So many fail because they don't get started - they don't go. They don't overcome inertia. They don't begin."

C:   lack of knowledge which leads to lack of interest, perceived lack of time and the misunderstanding that they are too young (or "its too late") to care.

I'd say (c), lack of knowledge.   They lack the knowledge that retirement is something they should plan for; instead they just think they will see if they have enough when the time comes.

c - lack of knowledge seems the main problem.   Because they don't know what they don't know, the task to learn seems overwhelming.

Lack of knowledge.

Many, many people know they should manage their money but do not really "get" the how to manage their money.

You would be surprised at how many people have their life savings wrapped up in 401k's and pay very little attention to it. When you ask them they say they do not have time to fool with it. They will not admit to the fact that they are short on knowledge also. Developing knowledge takes time and sometimes you learn the hard way. They would rather sit back look at the quarterly statements and curse or praise it.

I think it is (c) - lack of knowledge.

Many / most know they have heard they should be doing something.   But most people don't know where / how to start, and are afraid of looking silly / dumb, and therefore don't / won't risk "looking silly".

other -- procrastination

People I have talked to know they should do this, intend to do this, but keep putting it off till tomorrow....

I wanted to tell you, on a personal note, that since I began reading your newsletter, I have periodically put together some articles and emails to our employees talking about investing and participation issues. Yesterday I asked our 401k accounting person if there had been any increase in the percentage participating in the past year. She replied that there had been a 1% increase. I was really disappointed, until she told me that the dollars being contributed by the group had increased considerably in the past year, so at least there was progress on that front! I think your newsletter is really useful and valuable, hope you can keep it up.

My strong belief is (c) "lack of knowledge" as the reason people do not participate.   Unfortunately, the general working public in the is financially illiterate, trained to think only in sound bytes and encouraged by politicians to think someone else is responsible for everything, including their personal welfare.   No doubt, as these people approach retirement and wake up to what they have failed to do, they will look to plan sponsors and the government to fulfill their "social contract."   Sounds sort of like and doesn't it?

I - I believe that people do not see a benefit in the tools that we offer.

Let's face it.   Everyone knows we are going to tell them to save more money so why do they need to spend time and/or money getting someone to tell them that in a nice neat package?   People are not saving because they are spending for today.   If the tools provided a source for funding the individual's savings deficit then you could watch the lines form. As long as we tell them to save more of what they perceive that they do not have we are wasting our time.

OK. if I can only choose ONE then I choose

  (c) Lack of knowledge - about the plans available to them here at our company and about the basics of investment.   But with everything we provide it seems to be their choice that they lack this knowledge.

I would choose (e)   lack of the right kind of tools.    Not that I am sure just what the right tools could be since we have in place many opportunities for retirement planning/learning -   Information packages in paper and on our benefit web site, on line learning options with our retirement plan vendor,   retirement planning calculators, on site seminars etc.

c, lack of knowledge/understanding, closely followed by lack of $ to do anything about it.

Education takes motivation, time, and persistence.   Over the past decade, we've seen time poverty become a larger issues than ever. We've learned that motivation is lacking (except for a minority of plan participants -- 20%?) and, as a results, we don't even have to worry about persistence.

Most education efforts therefore oversolve the problem for the motivated group -- who, probably get the information they need from other independent sources (other than sponsor or provider).

I'd say the main reason most participants don't take advantage of retirement planning tools is precisely that which was contained in today's quote by Ben Stein:   So many fail because they don't get started - they don't go. They don't overcome inertia. They don't begin.    I've always believed in the power of group meetings called by employers to sort of jump start the individuals into action.   We can't just build the tools; we need to take them through the motions once or twice.   It's like so many other things that we know we should do to ensure a long, healthy life (like eat right and exercise); sometimes we need a gentle push in the right direction   --- or a buddy involved in the same pursuit --- to overcome inertia.

I chose (i) Other - - apathy to the issue because they don't believe they can ever accumulate the hundreds of thousands of dollars most retirement planning tools indicate will be needed.

(f)..."No perceived need to use them".

The attitude of people I talk to (both here and elsewhere) seems to be:

• "why bother?...I work for a great company and our stock has done well"
• "I trust the decisions my company's senior management and elected government officials make for me"
• "Oh well, I can always work until I die" or "Oh well, government will bail me out"

Having a successful retirement is just like everything else in life...if you want it to be prosperous, you have to work hard at it!

I'm stepping off of my soapbox now.

(g) cost

As a TPA, I'm often talking to plan sponsors and trying to help them raise participation rates.   The number one reason they give for why their participants are not contributing is "they just can't afford it".

I would have to say (i) other:   I think a lot of people do not know how to use the tools they have.   Some internet tools are not very user friendly if a participant does not know the difference between, say, a deduction and a contribution.   Prospectuses - don't get me started on how intimidating they can be.   Phone lines are not too helpful if the participant does not know how to verbalize what they need or are trying to do.

(i) financial apathy.   The case at our company is too often is that our people don't make enough money to meet their current obligations, let alone save for the future.   Their economic situation is such that they can't see beyond today's bills, so the importance of retirement isn't even showing up on the radar.   Another set of problems we experience, and perhaps as much as than the former, are the language and cultural barriers with a high number of hispanics in our production areas.

My theory is most individuals do not use retirement planning tools due to fear.   Intuitively many know that they have not been planning and saving and are not planning and saving enough for retirement - but fear that doing so will force them to sacrifice current lifestyle.    The fear may be irrational, but, in my opinion, it is the most likely deterrent to using provided tools.   Reminds one of the old adage "You can lead a horse to water, but….."

i)   Your Wed Wisdom sums it up perfectly!   "So many fail because they don't get started - they don't go. They don't overcome inertia. They don't begin." - Ben Stein.

Meaning they are not knowledgeable about where they can go to get the planning tools.  And why aren't they knowledgeable?  Because they do not attend the educational meetings or read the information sent to them.  Grrrrrrrr!

I know you said pick ONE, but it depends on what you mean by "lack of knowledge" - if that means "knowledge that the tools exist" then my response is either "no perceived need to use them" or "other".   If "lack of knowledge" means they don't understand the need - then my answer is c.   Perfect example, my own mother who informed me about a month ago that she is thinking about retiring in the next couple of years at age 65.   Her mother lived to 88 years old.   I spent a great deal of time explaining to her the fallacy in her decision - no social security to speak of and not enough saved at this point.  

She was very unaware of even how to figure out what she needed to have to retire.   That is a sad state of affairs and fairly prevalent.   Sad for two reasons - the first being that her daughter is a CPA, and the second being that she has been in the workforce as a nurse for 25 years and hasn't been exposed to sufficient education to prepare her for this.

The calculators are someone's best educated guess, but still a guess.   We always hear that past performance is not a predictor of future results. However, this is what a calculator tries to predict the future, with a lot of unknowns.   It's scary to hear that we need to plan for $137,000 to 1 million for health costs during retirement.   I can't fathom retiring with those costs looming on the retirement horizon.   I guess I'll just keep working forever.

F- no need to use them.  

I have experienced the following participant attitudes:

• I know everything there is to know about investing.
• Just let the money go to the default fund so I don't have to worry about it.
• I won't be around to collect it anyway so it doesn't matter where it is invested.
• This is just my mad money - Social Security will take care of the rest.                             

I will look at my investment options when I get closer to retirement.

(i) a lack of a deadline (retirement) that is near - the same reason most people do not have a will

Nevin -

We have had tremendous success lately using the book "The Automatic Millionaire".   We provided it to the entire staff and give it to new employees.   We also reviewed the book at a "lunch and learn" session.   It is a quick read which I am sure you have read that basically says forget about budgeting (and financial planning tools). Simply save a high percentage in your 401(K) and select asset allocation funds.   While this is obviously simple and would not work well for everyone it will work well for most people who have a 401(k).   Our biggest issue is asset allocation because of folks who have left their plan assets in funds that they were mapped into when we switched providers over 5 years ago.   Despite a lot of education in many formats many people will not change even though they know they should.   The is the same as people not having a will even though they know they should.

Our results speak for themselves.   Our participation rate increased form 98% to 100% and our average deferral rate increased from 8% to 11%.   The only enrollment we have had since then had 100% participation and an average deferral rate of 15% for about ten people, most of whom were recent college graduates who are in their early twenties.

Thanks for the tremendous work you and your staff do on the NewsDash!   It is the only email newsletter that I read every day!