Remote working has an impact on retirement planning, specifically in the way employees understand and decide how to invest and save for retirement. It differs in the absence of in-person meetings or guidance from HR or benefits staff.
It, therefore, presents interesting challenges for human resources staff, according to new Morningstar research, especially as it relates to helping employees adequately prepare for retirement.
Morningstar found that:
- Remote workers invest differently from local workers in 401k plans and are much more likely to be interested in a personalized advice option such as managed accounts (also referred to as robo-advisors).
- Remote employees are 7.4% less likely to use the plan default investment in target-date funds, and 1.3% more likely to use managed accounts, seeking personalized advice.
- While some of these changes may be due to demographic differences, the effects persist even after controlling for demographics.
- Participants who use managed accounts tend to save more for retirement, according to a growing body of research, despite the use of managed accounts options historically having been relatively low.
- Defined contribution plans expecting an increase in remote workers may want to consider adding managed accounts options to their plans if they have not done so. These can typically be added at no cost to the plan sponsor.
Managed accounts
One potential option to help employees better understand how much to save and how to invest in retirement is managed accounts, Morningstar noted in “Out of Sight, but Not Out of Mind: Helping Remote Workers with Retirement Managed Accounts.”
Citing Callan, it added that while access to retirement managed accounts has been growing over recent years, only 52% of plans currently offer the service.
“Overall, this research suggests remote workers invest differently in 401(k) plans than local workers,” Morningstar concluded. “Therefore, defined-contribution plans that do not currently offer managed accounts and expect an increase in remote workers may want to consider adding the option to the plan (or potentially a similar advice option), especially since these can typically be added at no cost to the plan sponsor.”