Any industry develops its own language and unique terms. Those in it consider them to be terms of art; those who are not, and whom a particular industry serves, are likely to regard its unique terms as jargon. Recent research shows that retirement plan participants are among those who prefer communication that is not riddled with jargon and “inside” terms that are familiar to plan providers, sponsors and administrators but mean little to those whom the plans serve.
“Boosting the Effectiveness of Retirement Plan Communications,” a report by the Empowerment Institute, concerns the results of three studies: a 2017 online survey of 2,000 Americans age 21 or older and participating in their employers’ defined contribution plans; a 2018 qualitative online focus group of 30 Millennials, Gen Xers and Baby Boomers participating in their workplace retirement plans; and a 2018 quantitative online survey of 1,000 Americans who are 21+ years old and participating in their employers’ defined contribution plans.
The common thread tying all study groups together is that they don’t like jargon and prefer simpler, more clear communication. “Overall, we found many commonly used industry terms don’t make sense to their intended audience,” says the report.
For instance: there are terms in common use concerning retirement plans that also have broader meanings in common parlance: allocation, contribution, deferral, distribution, election, match, rollover and vehicle. “When it comes to retirement planning, all of these terms have meanings that are completely out of step with the definitions most people associate with them. Such multiple meanings can cause confusion and create barriers to confident decision-making,” says the report.
Here’s a sample of some terms that the retirement industry uses and what the study respondents prefer:
|Terms Used by the Industry||Preferred by Study Respondents
employer contribution to your retirement,
amount your employer adds to your retirement
matching what you save
the portion of your paycheck you choose
to automatically deposit in your retirement account
retirement savings percent (or rate)
“Given the lack of clarity across age groups, financial providers clearly have room to improve how they communicate about workplace retirement plans. And it’s not just the vocabulary: Workers are also looking for higher quality retirement communications overall,” says the report.
Why This Matters
Words can inform, encourage and empower, the report notes, but on the other hand, “the wrong words can be powerful in negative ways, leaving people uncomfortable, overwhelmed or confused.”
“Using the right words is especially critical in financial matters,” the report says. “Employees need to understand their retirement plan options so they can make the best decisions for their future, but the general public often misunderstands words that are commonly used by financial providers, employers and others in the retirement planning industry.”
While the research found that many terms that retirement industry insiders use often “simply don’t make sense to savers,” it also revealed some good news. Even small changes can make complicated ideas understandable and make financial information accessible to participants, the report says; employers can support participants by making retirement communication jargon-free and easy to understand, and making it available to them through the communications mode of their choice.
“For employees choosing savings strategies for retirement and trying to make sure they’ll have enough to live on, the stakes are high. It’s important for financial providers and employers to know what employees understand and how best to communicate with them,” the report says. “By providing clear information via the methods your employees prefer, you can help them be well-informed about their options and confident in their decisions,” it concludes.