Demystify the investment menu with the right language

Our 2021 DC language study took a closer look at the language of defined contribution (DC) plans. Alongside Maslansky + Partners, a communications and research strategy firm, we conducted a national survey of 997 large-plan participants to highlight how the right language could help plan sponsors engage, inform, and motivate employees to save for retirement. 

Among our key findings, we learned that when survey participants first joined their current employers’ retirement plan, half (54%) chose their own investments versus being automatically defaulted into the plan’s investment option (46%). Whether participants invest on their own or stay in default options, there’s no question many find their DC investment menu somewhat confusing. What can help?

To begin, we found that participants prefer more control (or the perception of it), rather than less, when it comes to their money. Language conveying that participants have the ultimate decision-making authority over their retirement assets consistently won out — both with participants who preferred to be highly involved with investment decisions, and those who did not.

We also found that participants preferred investment menu names that provide cues about the offerings. While the retirement plan industry often uses a “tier” structure, this language doesn’t provide any context to participants. Instead, sponsors should present the investment menu with clear and descriptive titles.

When deciding how to present target date and target risk options, positive framing is important. Participants were significantly less likely to select from a group of funds that ranged along a higher-risk/lower-risk and aggressive/conservative spectrum. Instead, more than half would pick funds that ranged from “growth-focused to stability-focused.” Beyond sounding more positive, these descriptors provide greater context and clarity. In addition to aligning with participants’ desire for investments that are diversified, using the term “portfolio” signaled a collection of investments in a way “fund” and “strategy” did not. When ranking the benefits of both TDFs and TRFs, “fully diversified” was chosen as the most compelling benefit (34%).

Finally, based on our findings, members respond well to messages that communicate they’re not on their own when it comes to their retirement savings. For less knowledgeable members, language that conveys support may increase their confidence in professionally managed portfolios. For more sophisticated members, we believe the language of support speaks to how these investments can help them save and invest for the future.