No Jargon, Please: Think 401(k) Investors Know What ‘Fund’ Means? Think Again

  • Written by David
  • July 24, 2012 at 6:37 pm
  • 0
  • source: http://www.advisorone.com/

    All too often our respective industries get caught up in its own jargon. This article illuminates the subject too painfully well with respect to retirement plans. Along with behavioral finance (the study of our investment decisions), one can see why the investment arena is a mystery to many..

    excerpts from the article below.

    American employees want to save for retirement. Really, they do. The problem is that they can’t figure out the basics on how to invest in their 401(k) plans. And underlying that problem is retirement plan sponsors’ failure to communicate without using fancy financial jargon.

    Plain English, it turns out, is the key to getting employees to save more for retirement, says a survey of retirement plan participants released Wednesday by State Street Global Advisors (SSgA)

    “I don’t know what the S&P 500 is. I don’t have a sense of whether I’ve allocated my investments the right way or how I should diversify.”

    Five Easy Steps

    Simplicity and repetition are the key to getting plan participants to change their behavior, Madrian said. All people really want to know, she said, is exactly what steps they should take to improve the outcome of their retirement savings.

    Madrian then specified what plan participants’ “informed action” should look like, and she detailed how companies can encourage it by using nothing more than a printed worksheet.

    For example, it can simply lay out five steps for employees to take:

    1) Select a 30-minute time slot to sign up for your retirement plan.

    2) Gather your tools, including paper, pencil and a computer.

    3) Pick your investments using an overall mix that appears appropriate for you, and you can always refine your plan later.

    4) Complete your worksheet.

    5) Log in to an online account and sign up.

    click here to access the full article

 

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