3 Ways Financial Education Empowers Plan Sponsors and Employees at All Levels

financial education

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Today, employees are increasingly turning to their employers for financial help. Our research shows retirement preparation assistance is the top workplace benefits choice among employees, followed by help with financial planning and goals-based retirement investment planning.1

Employers and plan sponsors must find a way to meet increasing demand for help from employees at all levels as they navigate diverse circumstances, plan features, and goals—whether it’s saving while paying off debt, budgeting for a health condition in retirement, or factoring in Social Security, health insurance, and disability. Considerations like these should have a powerful impact on how individuals think about investing in a company retirement plan. Educated employees will make better choices and optimize their menu selection, resulting in a more balanced financial future.

As many workers continue to struggle to save and invest enough to build financial security for their golden years, the financial education gaps among employees deserve more attention. Let’s walk through three key benefits participant education can add to your retirement program:

Driving financial outcomes

When it comes to retirement plans, it’s not necessarily true that if you build it, they will come: A more hands-on approach is needed to educate and engage employees.

Retirement vehicles—from pensions to 401(k)s and other defined contribution plans, to state-sponsored IRAs—are all meant to help position employees for retirement. But what does that look like? Pew Charitable Trusts has identified a target retirement “income replacement” level of 75% of the average income earned between ages 45-64, simply to maintain quality of life and avoid economical vulnerability.2 This requires careful preparation, and while many employees are trying to better manage their financial planning, they may not know how.

It’s critical for plan providers, recordkeepers, and financial advisors to work together to help individuals navigate retirement planning. Cementing a more comprehensive fund line-up is foundational, but it’s just the beginning. The real test lies in educating employees on how to make the most of the tools and choices available through their plans.

In fact, we’re seeing that consistent financial education not only helps retirement plan participants, but also leads to more positive outcomes for plan sponsors—such as stronger relationships with employees, lower attrition, higher enrollment rates (especially for those without a default auto-enroll feature), and higher contribution rates from participants who enroll.1

Differentiating retirement programs

Many groups have been historically underserved in terms of financial and retirement benefits education. A more holistic approach to education requires understanding employees’ life stages, community concerns, and overall financial journey.

Individual needs are different, requiring a comprehensive range of materials and support to meet employees wherever they are today. To drive engagement, it’s great to have access to human professionals such as financial advisors. Of course, that may not always be possible amid tight budgets and increasing employee demand—which in turn places greater demands on plan sponsors.

Part of the solution includes delivering a robust digital library of content and resources that can address various topics while also defraying costs and delivering scale. Plan sponsors can work closely with plan providers, consultants, recordkeepers, and financial advisors to deliver education through digital newsletters, planning tools, onsite seminars, one-on-one open office hours, and pre-recorded webinars, videos and articles. Variety allows employees to mix and match their educational content according to their individual situations. It is becoming a key differentiator for organizations to offer thoughtful resources for a wide spectrum of employees, from entry-level hires all the way up to the C-suite.

Defending fiduciary responsibility

We continue to see that employees are more engaged when they understand their benefits and are confident in how to use them. And more companies are approaching retirement plan education from the perspective of fiduciary responsibility, working to protect the best interests of their employees at all levels of financial sophistication. The goal is to educate for the long term, helping retirement participants pursue their goals while also encouraging all employees to understand why investing for their future is so important.

Plan providers, investment consultants, financial advisors, and recordkeepers are valuable resources to help support participants in making smarter retirement planning decisions. Not only can education drive improved financial outcomes for both individuals and the businesses that employ them, but frankly it’s the right thing to do.

  1. Morgan Stanley at Work, State of the Workplace IV, data available upon request
  2. States Face $334.3 Billion Shortfall Over 20 Years Due to Insufficient Retirement Savings | The Pew Charitable Trusts (pewtrusts.org)


This material has been prepared for informational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (“Morgan Stanley”) recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Morgan Stanley Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

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