Quantified peers and the retirement savings incentive

286948_feat_imgYou wake up and go for your morning run. Checking your wearable fitness tracker, you see that among your friends you are two spots from the top of the leaderboard for distance this week.

Pulling up the morning paper on your tablet, you read an article on emerging-market bonds because five of your Facebook connections have recommended it.

Later that night, because you added “House of Cards” to your Netflix queue, you learn that other “House of Cards” fans also liked “Sherlock.” You watch eight episodes that night.

Technology has made possible the Quantified Self, a potential solution to some simple problems like exercise motivation and entertainment choices. But the Quantified Self also holds great potential for important life decisions — like evaluating life expectancies and reaching a safe, secure level of retirement savings.

Recognizing the need for innovative applications of technology to counter inertia and encourage workers to save, Putnam is launching “How do I compare?,” a peer comparison feature for Putnam defined contribution plan participants.

peer-comparison

Using data from our 401(k) plan participant base, savers can compare their deferral rate and potential income replacement in retirement with those of their peers. Peers are defined by several criteria including age, salary, and gender. Ultimately, the feature can help participants calculate the impact of changes to retirement outcomes and make changes if they desire.

In the 401(k) industry, plan design features such as automatic enrollment are raising participation rates. But encouraging participants to save more requires additional strategies. Automatic features, education, financial literacy, and lifetime income illustrations are becoming standardized aspects of plan design. By making retirement saving a part of the growing quantified peer movement, we can put retirement in a sharper focus and move it higher among the priorities for lifestyle decision-making.

As people work to improve their quality of life, the desire to move up the leaderboard may motivate them to save more for retirement.

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