Boosting the effectiveness of retirement plan communications

There are several terms that a majority of respondents report understanding such as contribution, enroll and rollover.

With small tweaks, jargon can be understood. An example is to use the term employer match instead of match.

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 Words have the potential to inform, encourage and empower. But 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. 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.

In fact, original Empower Retirement research has found that many terms frequently used in the industry simply don’t make sense to savers. However, the research also revealed some good news: Even small tweaks can help break down complex ideas and make important financial information accessible to plan participants. Employers can support their participants by making their retirement communications easy to understand and free from jargon, then delivering them via the method of communication employees prefer.

Below we explain why commonly used language in financial information is difficult for many readers to digest and offer research-backed tips on boosting clarity.

How jargon hurts

Think back to the last time you watched a court proceeding on TV or went to the doctor’s office. You probably heard some words whose definitions you didn’t know with certainty or maybe at all. Those words may have sounded highly technical — something you’d refer to as jargon.

Every profession has its own set of jargon. For professionals working within a particular field, that trade-specific lingo is a sort of shorthand that gets the point across quickly to colleagues who share that language. But to an outsider, the language can be alienating. (See A jargon grab bag below.) Jargon is particularly troublesome because industry insiders often don’t recognize when they’re using it.

Now consider some of the words typically used in workplace retirement plan communications, such as contribution or match. These terms are readily understood by employers, service providers, consultants and the business media. But how do employees view these words?

Consider the following examples of plan terms that have different meanings in common use: 1

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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.

Bridging the gap in understanding

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.

We conducted three studies spanning 12 months to find out what individuals understand, and what they don’t, when it comes to financial and retirement-industry jargon. (See below.) We also asked about preferences for retirement plan communications. Our goal was to find out how to communicate more effectively with plan participants.

Our communications research included: