When you hear “AI,” your first thought is probably artificial intelligence. While AI is certainly transforming industries, market-leading retirement plans are built on a different kind of AI:
Automated Inputs. Appropriate Investments. Actionable Insights.
These three elements can help employers create retirement plans that drive stronger participant outcomes and better retirement readiness.
One of the most effective ways to improve retirement outcomes is to make saving automatic.
Features such as automatic enrollment and automatic escalation help employees begin saving as soon as they become eligible and gradually increase their contributions over time. By reducing the need for employees to take action on their own, automation helps establish positive savings habits early in their careers.
When it comes to retirement investing, time is one of the most valuable assets employees have. The sooner they begin saving, the greater the potential benefit of compounding returns. Automated plan features help employees get on track from day one and stay on track throughout their careers.
Saving for retirement is only part of the equation. Employees also need to be invested appropriately based on their age, time horizon, and risk tolerance.
Target date funds, managed accounts, and other professionally managed asset allocation solutions can provide participants with diversified portfolios designed to align with their retirement goals. However, during strong market environments, some participants may be tempted to take on excessive risk or concentrate their investments in a limited number of holdings.
Ongoing education around diversification and investment discipline can help employees maintain an asset allocation strategy that supports their long-term objectives, regardless of market conditions.
Retirement plans generate a wealth of data that can help employers better understand participant behavior and improve plan outcomes.
By analyzing participant engagement, savings rates, investment elections, and withdrawal activity, plan sponsors can identify opportunities to strengthen their retirement program. Insights from plan data can reveal participation gaps, highlight potential leakage, and uncover areas where employees may benefit from additional education or support.
These insights allow employers to tailor plan design, personalize communications, and deliver resources that help employees make more informed financial decisions.
Artificial intelligence is likely to play an increasingly important role in the retirement plan ecosystem through personalized guidance, enhanced participant engagement, and improved plan administration. In many cases, it is already beginning to do so.
But before focusing on the AI of the future, employers should ensure they have mastered the AI that matters most today: Automated Inputs, Appropriate Investments, and Actionable Insights.
Because market-leading retirement plans aren’t built by technology alone—they’re built by helping employees save earlier, invest wisely, and make better financial decisions throughout their journey to retirement.
FAQs for Retirement Plan Sponsors
1. What are “Automated Inputs” in a retirement plan?
Automated Inputs are plan features like automatic enrollment and automatic contribution escalation that help employees begin saving as soon as they’re eligible and gradually increase their savings over time. These features can improve participation rates and help employees build stronger retirement savings with minimal effort.
2. Why is automatic enrollment important?
Automatic enrollment helps overcome employee inertia by making retirement saving the default option. Research consistently shows that plans with automatic enrollment tend to have higher participation rates, helping more employees start saving earlier and benefit from long-term compounding.
3. What is automatic escalation, and how does it help employees?
Automatic escalation increases an employee’s contribution rate at regular intervals, often annually, until a predetermined target is reached. Small, incremental increases can significantly improve retirement readiness while minimizing the impact on take-home pay.
4. What are “Appropriate Investments”?
Appropriate Investments are investment options that align with a participant’s age, retirement timeline, and risk tolerance. Solutions like target date funds and managed accounts help provide diversified portfolios that can adjust over time as retirement approaches.
5. Why is diversification important in a retirement plan?
Diversification helps reduce investment risk by spreading assets across different investment types. It can help participants avoid becoming overly concentrated in a single investment and encourages a disciplined, long-term approach to investing through changing market conditions so they stay invested.
6. What are “Actionable Insights” for retirement plan sponsors?
Actionable Insights are data-driven observations from your retirement plan that can help identify trends in participation, savings rates, investment behavior, and withdrawal activity. These insights allow plan sponsors to make informed decisions that strengthen plan design and participant outcomes.
7. How can plan data improve retirement outcomes?
Plan data can highlight opportunities to increase participation, reduce retirement plan leakage, improve savings rates, and identify employees who may benefit from additional education or communication. Using these insights helps employers provide more targeted education and support.
8. How is artificial intelligence changing retirement plans?
Artificial intelligence is beginning to enhance retirement plans through personalized participant guidance, improved engagement, more efficient plan administration, and advanced data analysis. While these capabilities continue to evolve, many employers can make meaningful improvements today by focusing on strong plan fundamentals.
9. What are the first steps employers can take to improve their retirement plan?
Employers can start by reviewing whether their plan includes automatic enrollment and automatic escalation, evaluating whether investment options support participant needs, and using plan data to identify opportunities for better education, communication, and plan design. Small improvements in these areas can make a meaningful difference in employees’ long-term retirement readiness
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