Evaluation Perspectives

Retirement Planning

Perhaps no other audience for financial education is as large and diverse as that for the topic of retirement planning. Unlike shorter-term financial planning goals like buying a car, or house, or even saving for a child’s postsecondary education, retirement planning can literally take place for seven or eight decades from the start to the end of someone’s adult life (e.g., 20s through 80s or 90s). Even among adults who are employed, workplace retirement planning programs often target a wide swath of demographics ranging from recent college graduates in their 20s to soon-to-retire employees in their 50s, 60s, and beyond. Financial education program objectives for each group will likely vary. For example, the focus for young adults is saving early and often, preferably with automated investment plan deposits. Another key topic for young adults is basic investment principles to help them make sound retirement plan asset allocations.


The words “retirement planning” have a very different meaning to financial education audiences at different stages of life. At ages 20-35, a key message is “time is on your side.” For example, college students graduating at age 22 have 45 years of compound interest on their savings before they are eligible for full Social Security benefits at age 67. In the “middle years,” ages 35 to 50, ongoing savings is key, especially in tax-deferred retirement savings accounts such as a 401(k) and 403(b), but there is also the problem of having too many other living or family expenses, so saving for retirement may be postponed or underfunded. In later adulthood, age 50 to 70, people are (hopefully!) empty nesters and can accelerate savings even further. A primary retirement planning concern of people age 70+ is making their savings last throughout their lifetime. The high costs of health care and long-term care are also major concerns.

9A. Key Programs and Resources

Websites from agencies and organizations (both for-profit and non-profit) provide valuable retirement planning resources that are frequently used by financial educators. Some sites provide general information and others focus on research results. What follows are four sites to visit: My Retirement Paycheck (National Endowment for Financial Education) contains information about eight key retirement decisions organized by topic (e.g., housing and retirement plans). Retirement Confidence Survey (Employee Benefit Research Institute, EBRI) is an annual survey that measures workers’ attitudes about retirement and trends in how people are planning for retirement. Retirement: Secure Your Future (Iowa State Extension) is a source of workshop materials about retirement planning topics for learners in different life stages. The Social Security Administration provides publications and information on locating a local Social Security office, applying for benefits online, and obtaining an online Social Security benefit estimate.

Some websites help people with personalized retirement planning calculations and other planning tasks that are related to retirement planning. Three examples are: Ballpark Estimate (American Savings Education Council) is a simple planning tool that provides a rough estimate of the amount of money that someone needs to save for retirement. Compound Interest Calculator shows what an investment deposit will grow to at a specific interest rate over a specific number of years. Life Expectancy Calculator (Northwestern Mutual Insurance) provides an estimated life expectancy based on personal health and lifestyle factors as part of The Longevity Game.

9B. Major Topics and Literature Review

As noted above, the audience for retirement planning programs is large and diverse. Thus, major topics related to financial education programs will necessarily vary according to the needs of the target audience and their stage in the life cycle. Clark, Morrill, and Allen (2012a) note two key periods to teach retirement planning at workplaces: when a worker is first hired (to sign up for retirement savings plans) and near retirement (to make choices that optimize lifetime well-being). Topics for learners in the accumulation phase of retirement planning (roughly 20s through early 60s) include the impact of compound interest over time, how to do a retirement savings need analysis, characteristics of retirement plan investments (e.g., target date mutual funds), and basic cash flow management strategies to “find” money to save.

Topics for learners in or approaching the distribution (a.k.a., decumulation) phase of retirement planning, where savings is converted into retirement income, are quite different. They include determining if retirement savings are adequate, Social Security benefits, catch-up retirement planning strategies, calculating required minimum distributions (RMDs) from tax-deferred savings plans, planning for health and long-term care expenses, and determining the amount of money to withdraw from savings to create a “retirement paycheck” and avoid outliving one’s assets (NEFE, 2016b). As noted by Lusardi and Mitchell (2007b, p. 9), “education programs will be most effective if they are targeted to particular population subgroups, so as to address differences in savings needs and preferences.”

Americans are increasingly in charge of providing for their own financial security in later life. During the past four decades, they have gone from needing to know very little about their retirement plans to having to decide if, when, how much, and where to invest and to choose among various retirement plan investment options. They have also had to learn investment terminology (e.g., dollar-cost averaging, target-date funds) and contribute a portion of their earnings to savings plans without a guarantee that their savings will support them throughout their lifetime. Unfortunately, many Americans display limited knowledge and understanding of public and company-provided retirement benefits with misperceptions about eligibility ages and plan generosity that lead to sub-optimal choices (Clark, Morrill, & Allen, 2012b). Financial illiteracy is widespread among older Americans, particularly women, minorities, and the least educated (Lusardi & Mitchell, 2011).

Not surprisingly, financial education related to retirement planning often takes place at worksites. Previous studies have documented that workplace financial education may have positive effects. For example, Joo and Grable (2005) found that persons exposed to workplace financial education were more likely than other workers to have a retirement savings program and that having retirement savings was related positively to retirement confidence. Similarly, Kim, Garman, and Quach (2005) found that financial education program attendance was positively related to employees’ and their spouses’ retirement savings contributions. Collins and Urban (2016) used a randomized field study and found that employees offered access to financial education increased retirement plan savings by $30 per month, suggesting the effectiveness of retirement programs to increase retirement planning and saving behavior.

Clark and d'Ambrosio (2003) found evidence that high quality financial education can be effective in altering retirement income goals. After receiving information on the level of retirement income needed to continue pre-retirement consumption, seminar participants amended their income goals and, in many cases, their investment asset allocation. Clark, Lusardi, and Mitchell (2014) explored associations between financial knowledge and retirement savings plan performance and found that risk-adjusted annual expected returns were 130 basis points higher for the most financially knowledgeable employees. Xiao and O’Neill (2016) explored the potential effects of financial education received at a workplace on five different measures of financial capability, both objective and subjective, and found positive associations with these financial capability indicators as well as for financial education received in high school, college, or from any source.

Bayer, Bernheim, and Scholz (2008) examined the effects of workplace education on financial decision-making and found that both participation in, and contributions to, voluntary savings plans were significantly higher when employers offered retirement seminars. The effect is typically much stronger for non-highly compensated employees than for highly compensated employees. Bernheim and Garrett (2003) found evidence to support the hypothesis that employer-based financial education stimulates saving, both in general and for retirement. Creative motivational strategies may enhance workplace financial education efforts; for example, providing vivid images that enhance participants’ emotional responses.

Herschfield et al. (2011) found that people save more after being shown digitally altered pictures of themselves at an older age. In other words, seeing your “future self” increases the likelihood of favoring long-term rewards (over consumption) by saving. In addition, simplifying the process of enrolling in an employer retirement savings plan may motivate employees to save. Lusardi, Keller, and Keller (2009), in research funded by the National Endowment for Financial Education, used a flyer that broke the retirement plan enrollment process down into seven steps and a video. They found a 56 percent increase in plan election within 30 days of viewing communication programs, versus employees who were not exposed to them, and sustained differences over 60-90 days. Another motivating influence for saving is knowing how much income can be withdrawn from a retirement savings account in retirement. Goda, Manchester, and Sojourner (2013) found that workers who received a brochure showing increased income from increased savings saved $1,150 a year more than those who did not get the pamphlet.

Lusardi (2003) found evidence that retirement seminars can foster saving and wealth accumulation and bolster financial security in retirement. By offering financial education, net worth increases sharply, particularly for families at the bottom of the wealth distribution and those with low education. Lusardi and Mitchell (2007a, 2005) found that respondents who reported planning for retirement had higher wealth levels in later life. In addition, planning was strongly correlated with financial literacy and the relationship between planning and wealth remained strong even after controlling for many sociodemographic factors. Similarly, van Rooij, Lusardi, and Alessie (2012) found evidence of a strong positive association between financial literacy and net worth even after controlling for many determinants of wealth. They concluded that financial literacy may facilitate wealth accumulation by increasing the likelihood of investing in the stock market and fostering development of a savings plan, which has been shown to boost wealth. Conversely, ignorance about basic financial concepts can be linked to lack of retirement planning and lack of wealth (Lusardi, 2008).

Women have unique retirement planning needs compared to men. They live longer and earn less, on average, and are more likely to have gaps in their employment history due to family care-giving responsibilities. In addition, some women rely on a spouse for income and risk becoming a “displaced homemaker” if the relationship ends. Some also defer financial management tasks to others (Brennan & O’Neill, 2014). Lusardi and Mitchell (2008) found that women display much lower levels of financial literacy than the older population as a whole. Also, women who are less financially literate are less likely to plan for retirement. Clark (2003) examined the impact of participation in financial education seminars and found that participants planned to change their retirement savings behavior based on knowledge gained at the seminar. Women were more likely than men to alter their retirement goals and saving behavior.

Another key area of retirement planning research is the issue of how much can be withdrawn from retirement savings without exhausting the pool of financial resources. Retirement research that began with Bengen (1994) suggests that initially withdrawing about 4 percent of savings (whatever the dollar amount) and increasing it annually for inflation has a high success rate (i.e., chance of not running out of money) over 30 years. New research findings with “floor and ceiling” withdrawal strategies (Klinger, 2011), “decision rules” (e.g., freezing income during periods of negative investment returns), and rising equity glide paths (Kitces & Pfau, 2014) have been shown to increase success rates even further.

9C. Evaluation Practices, Strengths and Limitations

Many financial education programs related to retirement planning use data collection methods that include paper or online surveys, pre- and post-program knowledge quizzes, focus groups, interviews, observations, and follow-up evaluation surveys. Koundinya et al. (2016) found that an electronic survey with two-month follow-up intervals yielded significantly higher response rates than other methods.

A commonly-used survey method is the post-then-pre (retrospective) evaluation that asks participants to assess their pre- and posttest knowledge and attitudes about a topic, such as retirement planning, only after an intervention (e.g., class series, webinar, financial coaching) (Moore & Tananis, 2009). The reason that the post-then-pre assessments are administered once at the end of the intervention is to avoid biases resulting from people thinking that they know more than they know at the outset of a program.

Typical surveys include items that measure changes in knowledge, motivation, confidence, and abilities, both planned and actual (e.g., dollars saved) changes in behavior, future programming needs and preferences, and demographic characteristics of participants. There are a number of readily available evaluation survey templates such as those contained in the NEFE Financial Education Evaluation Toolkit (NEFE, 2016a). Strengths of the above-mentioned survey methods include relative simplicity and little or no administration cost for financial educators with limited program evaluation budgets.

A major weakness of evaluation of programs for retirement planning is the serious methodological issue of selection bias; i.e., the lack of comparison of financial education program participants with a control group who did not receive the financial education. Those who choose to attend a retirement financial education program may be different (e.g., more conscientious or focused on their personal finances) than others who do not. Many program evaluations also use self-reported data, which introduces the risk of response bias, and cross-sectional studies limit inferences about causal impacts (Collins & O’Rourke, 2010). Another weakness is the lack of capacity in many organizations with multiple program units to aggregate impacts using common indicators such as those listed above. Also, the use of control groups and longitudinal studies in financial education evaluation is relatively rare. Many educators simply don’t have the technical expertise and/or funding for these types of data analysis.

9D. Public Communication

Responsibility for financial security in retirement has been transferred, for the most part, from government and employers to individuals. Many Americans are financially unprepared for retirement, including millions of “middle Americans” with annual household incomes of $30,000 to $100,000 who have low savings, high debt, and a tendency not to consult professional advisers (Neiser, 2009). Inadequate savings and uneducated choices (e.g., incorrect required minimum distributions and retirement asset withdrawals) pose a threat to both these individuals themselves and the nation as a whole.

Educating workers about retirement planning and workplace retirement plans has gone from nice to necessary in today’s YOYO (you’re on your own) economy with complex monetary products and later-life financial decisions. The audience for retirement financial education worksite programs can span three different generations (Baby Boomers, Generation X, and Millennials), each with its own unique learning needs that require targeted programs.

The timeline for retirement planning is the longest of any financial planning goal. Even small amounts of savings, given decades to grow, can accumulate handsomely over time. As a consequence, retirement financial education encompasses much more than IRAs and 401(k) plans; it often includes basic skills such as balancing a checkbook, controlling a budget, using credit wisely, and “finding” money to invest for the future. There is some evidence that appealing to people’s emotions (e.g., showing them what they’ll look like in their 80s), breaking financial actions down into simple steps, and creating personalized retirement income illustrations can prompt increased retirement savings.

Saving for retirement is especially difficult for workers with low take-home pay and/or fluctuating incomes. Barriers need to be addressed and any step forward (e.g., increasing savings by 1 percent of pay or completing a $100 savings challenge) should be viewed as progress. There is some evidence that the most disadvantaged persons with low incomes and educational levels, who are at the highest risk for financial insecurity in later life, experience the greatest effects from financial education programs.