The Boulevard to Financial Independence

By Matt

In talking with a leading behavioral economist yesterday about online advice tools and his research, we got onto the topic of why people are in such bad shape when it comes to retirement preparedness.

It may be that most consumers never received any formal financial education. It may be that they were conditioned not to save, particularly Baby Boomers, since they came of age during inflationary times, when a dollar saved was a dollar lost. It may also be that current online planning tools are developed by math majors and software engineers, not usability experts or behavioral finance experts. For example, tools like the current retirement calculators expect you to know how much your vision for retirement is going to cost and it’s difficult to extract very useful next steps, though surveys indicate that they can help motivate users to save more.

Overall, existing tools, like this planner used by large financial services companies, do a poor job of personalizing results based on what a user wants to do in retirement and also fall down when it comes to laying out next steps. Tools like Fidelity’s myPlan are far from motivating when it shows you what a significant shortfall you have and then doesn’t deliver anything useful to help you get on track for retirement.

Is there any other possible next step besides calling a Fidelity rep to set up an account or spend a lot of time entering personal data for results that only focus on asset allocation and not savings behavior?

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