In its study “Experience Matters: The Connection Between Personalized Projected Retirement Income and Retirement Readiness,” Empower Retirement found that plan participants who are exposed to a projected view of their future monthly income will likely have higher expected income replacement rates in retirement.
In 2010, Empower decided to break with the conventional manner of informing participants about their savings. Instead of providing them with their accumulated balance figures, Empower began providing them with not only the total they have saved so far, but also with a figure showing their monthly replacement rate. They based doing so on the premise that the monthly figure would mean more.The result? Empower said that telling people what their monthly replacement rates are resulted in those rates increasing. To the tune of a 14.4% increase, from 68% at the start of the study period to 77.8% six years later. Providing that information did indeed motivate participants to save more — the average for those whom it did raised their savings rate by 18.8% to 8.4%. Not only that, they found that participants increased their deferral rates even more when they were given information about what their health care expenses in retirement may be.
Empower Retirement has sizable basis for its conclusions. It studied six years’ worth of figures from 300,000 active retirement plan participants in 569 retirement plans it manages.