If you manage retirement plans for employees and companies, you already know how important it is for your plan communications to be accurate and precise. Unfortunately, the level of precision needed in these communications makes it easy to slip into jargon and confusing legalese, which may dampen your plan participants' enthusiasm for saving. Below, we discuss why it's important for retirement plan sponsors and financial professionals to use simpler language in their retirement plan communications.
Direct Language Makes Participants More Likely to Act on Retirement Plans
A 2019 study revealed that more than half of all respondents who were presented with a simple and direct description of their retirement plan were either "very likely" or "extremely likely" to stay in the plan that offered a monthly payout.1 On the other hand, using terms like "allocation" and "deferral" were enough to cause employees to shy away.
These responses vary widely by generation. Younger generations, like Gen Z and Millennials, reported that these jargon-y financial terms tend to make them feel hesitant about discussing their finances, while Boomers and members of Gen X are more likely to be comfortable with these terms. This means that plan sponsors should think carefully about how they communicate to avoid alienating their younger employees. Something as simple as explaining that an employer match is "free money" may boost plan participation rates.
Terms to Consider Retiring
Survey respondents have identified a few of the terms that tend to be confusing, highly technical, or too jargon-y:
- Asset allocation
- Employer contribution
- Individual retirement account (IRA)
- Portfolio distribution
- Investment allotment
- Fiduciary adviser
- Holistic financial view
Even if you work with these terms regularly, they may be tough to define on the fly—which sometimes means an employee who stumbles across them may not understand what they mean. Without some context, these terms cause the reader's eyes to glaze over or make your plan seem overly confusing and technical.
Instead, consider how you may better communicate your plan terms and benefits to employees in an informative, engaging, and easy-to-understand manner. This may also mean branching out a bit in how you communicate with plan participants. Email and "snail mail" letters may no longer cut it; text messages or IMs may be a better way to contact members of the younger generation.
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All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
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