Overview

Saving for retirement is a major life goal, but most Americans aren’t setting aside enough of their income towards retirement.

Research from Bankrate.com shows that only 16% of adults in the U.S. are saving more than 15% (the recommended amount) of their income, while 21% aren’t saving at all. To help motivate people to save more, Charles Schwab partnered with Cantina to redesign their forecasting tool and strategize a peer comparison feature to enable participants to compare themselves against others of similar age, income, location, etc.

Peer comparison is an effort to gently nudge participants to increase their retirement savings by employing the social comparison theory, which suggests that we evaluate ourselves and modify our behavior in part by how we measure up against others.

Differentiating a 401(K) Participant experience with peer comparison

In 2015, Schwab teamed up with Cantina to redesign the My Retirement Progress (MRP) area of their online participant experience. Within the MRP space, participants can view their proprietary ‘MRP Score’ and speculate on how changes to key variables such as savings rate, retirement age, or expected investment returns might affect their score. The goal is not only to incent participants to save more but also to educate them on the relative importance of each factor (retirement age, savings, and savings rate) in the savings process. Cantina’s redesign effort was to rethink the visual experience and update the calculation engine that determines MRP scores.

Once the forecasting design and development was complete, Schwab and Cantina strategized on how to use Schwab’s recordkept data to create custom peer sets for peer-to-peer comparison. Believing that the power of social comparison lies in the ability to identify real “peers” as opposed to people who simply fit within a broad range of key attributes, like age or income, Cantina created an engine that generates custom peer sets for each participant. The engine seeks a minimum number of peers, but wherever possible narrows the ranges for similar age, salary, and retirement balances to create meaningful, actual “peers”. Now, when participants log into their Schwab online portal, they view a peer set that is often within +/- 1 year of age and +/- 10% of annual income. Schwab hopes these custom peer sets will act as a powerful motivator to invest as plan participants progress towards retirement.

Schwab’s My Retirement Progress is a key visual component of every 401(k) participant experience, and Schwab worked with Cantina to help differentiate that experience from other 401(k) providers.

Targeting increased engagement and higher contribution rates

Schwab recently launched an updated version of MRP. While it is still too early to measure the impact of the new experience, Schwab is optimistic that with more sophisticated forecasting, MRP readiness scores, and peer comparison, they will achieve several important goals, including:

1. Heightened awareness of key factors that drive retirement readiness
2. Better participant engagement as a result of better planning tools and a more powerful motivational experience
3. Increased participant contributions in 401(k) plans

Schwab and Cantina continue to work together to optimize Schwab’s 401(k) participant experience through the design and development of innovative new tools like peer comparison.