The 4 Critical Elements of a Successful 401k Plan Education Program

Without proper knowledge everyone will make emotional and usually imprudent decisions with their money. Investing for retirement requires participants to acquire the right information to develop a prudent strategy. Investors don’t have to know everything about investing but they do need to know the right things.
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  • Consistent and Regular – This means the terminology used in all plan literature is consistent with the terminology used in the education program. If the plan’s education program talks about goals in terms of the modern investment objectives, then the plan’s web-site cannot continue to refer to the traditional investment objectives. (If you’re unfamiliar with the difference between the two, read “401k Plan Sponsors: Is Your Investment Policy Statement Still Using Outdated Language?, May 17, 2011.) Similarly, an education program should be a regularly event and scheduled at a convenient time for employees.
  • Tied to Investment Policy Statement – An IPS that can’t be understandably articulated to employees through education is not worth its salt. Likewise, a well-drafted IPS that isn’t understandably articulated to employees through education is not worth its salt. The IPS drives the investment philosophy of the plan and should also provide a handy blueprint for a successful education program. (For those interested in learning more, read “How Should a 401k Plan Sponsor Construct an Appropriate Investment Policy Statement?, June 7, 2011.)
  • Covers both Administration and InvestmentsSure, the quarterback gets to do all the commercials, but he wouldn’t be where he is if it weren’t for his linemen. Similarly, everyone always wants to talk about investments, but the problems 401k plan participants face aren’t due to a lack of good long-term investments, they’re mainly due to inadequate savings. The mechanics of savings begins with understanding the administrative functions of the plan and carries through how participants determine their broad investment strategy.
  • Customized to the Plan’s EmployeesMany investment professionals once thought the need to understand plan demographics disappeared as we migrated from pension and traditional profit sharing plans to participant directed 401k plans. That can’t be farther from the truth. Not only do we need an array of investment options geared to people of different ages and different economic backgrounds, but the plan’s education program needs to address the different learning styles of the different generations.

Retirement plan education may be the key element to a successful plan. When employees are engaged and informed they will be more comfortable with saving and investing. It may be more of a matter of coaching. Providing the right principles and remaining disciplined to a scientific designed strategy.

Please comment or call to discuss how your plan can be improved through a proper education program.

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