Dartmouth study finds ways to boost retirement saving

Monday, January 10, 2011

Dartmouth College researchers have found effective ways of increasing the retirement savings participation rate of female and low-income employees -- people who have historically been more skeptical of their ability to save.

Through a grant provided by the National Endowment for Financial Education, Tuck School of Business researchers Annamaria Lusardi and Punam Anand Keller took a closer look at the saving and investing hurdles facing female, low-income employees and those employees with short tenures at Dartmouth.

Through the use of flyers and videos they were able to “reduce anxiety about future retirement needs; to increase awareness about financial knowledge, including interest in professional advice; and to increase participation and contribution to supplementary retirement accounts among female and low-income workers,” the wrote.

While many investment consultations begin with a meeting with a financial adviser to discuss timelines and what-ifs, but to those whose retirement goals are vague or unknown even these starting points can seem daunting. To cut through the barriers, the researchers came up with two communications programs.

A flyer depicted potential obstacles to saving for retirement, such as a lack of financial resources and even access to a computer, and suggested ways to overcome these obstacles, such as bringing lunch or coffee from home to save money or considering the tax benefits of saving and investment funds with low contribution thresholds.

The researchers also created a series of four video interviews of employees on campus with similar circumstances that have successfully participated in a retirement account.

A target sample of 124 new Dartmouth employees attended orientation from January through June 2008. Sixty-four target employees watched the video while 60 did not see the video during an otherwise identical orientation session.

Results of the 18-month study were impressive. Supplemental retirement account participation increased by 147 percent overall among those who saw the videos, with a 56 percent increase in enrollment within 30 days of new-hire orientation.

The researchers said, educational methods used in the study can be applied to other institutions or organizations trying to increase the participation rate of their retirement savings programs.

“Our data collection instruments and the findings from the focus groups and in-depth interviews may be used by other organizations seeking to create their own employee videos. They may also use our videos. We have demonstrated that we can dramatically increase retirement savings by tailoring communications for different employee audiences,” wrote Lusardi and Keller.

A copy of the study, including links to the videos, may be downloaded at http://www.nefe.org/LinkClick.aspx?fileticket=HqSDPBWhVZk=&tabid=758 – CINDY KIBBE/NEW HAMPSHIRE BUSINESS REVIEW

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