By Paula Aven Gladych
One-on-one education is the best way to get individuals to save for retirement, according to new research by the Principal Financial Group.
People who participate in personalized benefits sessions at work tend to take more positive actions like participating and saving more.
Over time, the high deferral rate, combined with the commitment to increase savings among those who attended one-on-one meetings, could mean an additional $242,000 at retirement
, based solely on employee deferrals. That could translate into an extra $905 a month in retirement income, according to Principal Financial Group, which is 69 percent higher than participants who didn’t have one-on-one education.
“We know from face-to-face educational meetings that retirement savers benefit from hearing a person explain how the retirement plan works rather than having to shuffle through documents by themselves,” said Barrie Christman, vice president, individual investor services at The Principal. “Take it a step further with personalized one-on-one meetings on company time and significantly higher numbers of participants are taking actions that can help get them to the 11-15 percent contribution range—including employer match—that we believe is needed over the course of a career to have sufficient retirement income.”
The Principal analyzed the actions taken by participants covered by Principal retirement plans who attended a one-on-one meeting in 2011. It found that 92 percent agreed to take a positive action and 80 percent completed the action. The top actions were to increase savings rates now and commit to continue to increase them in the future.
It found that on average, deferral rates were 9 percent higher among one-on-one participants compared to those who attended a group educational meeting. Nineteen percent of one-on-one participants chose to automatically increase their retirement plan
contribution compared to only 2 percent of participants who took part in a group educational meeting. It also found that on average, one-on-one participants chose to increase their contributions by 1 percent each year for an average of five years.
“Even a small increase in savings can make a big difference in retirement security over time, especially when there is a commitment to keep increasing contributions,” said Christman. “While plan design—automatic savings features, higher default rates and employer match—plays a critical role in empowering participants to save effectively, face-to-face education is a key tool in the retirement readiness toolbox.”
The Principal Financial Group is a global investment management company that provides retirement, asset management and insurance through its diverse family of financial services companies.
Originally published on BenefitsPro.com