Participants expend a lot of energy around potential withdrawals because of competing financial objectives, and here's where chatbots can be particularly useful. (Photo: Shutterstock)
Artificial intelligence is becoming an ever-more-present part of interacting with employer-provided benefits. And while it can't satisfy all employee needs, it does offer some unique advantages, particularly in the retirement planning process.
In its white paper “Retirement 2058: What artificial intelligence reveals about 401(k) plans,” turnkey retirement plan provider Dream Forward Solutions finds that AI in the form of chatbots can be particularly helpful—although certainly not providing all the answers, either literally or figuratively—for assistance with retirement planning.
In fact, some of the best help they provide actually comes in the form of identifying how retirement plans can be improved.
Plan participants have five very specific areas in which they ask the most questions of chatbots, according to the paper:
- efforts to understand their retirement benefit;
- understanding how retirement accounts work;
- understanding the tax consequences;
- trying to accommodate multiple financial objectives in addition to saving for retirement, such as student loans, credit card debt and other obligations;
- investing-related questions
Approximately 63 percent of the questions, says the paper, focus on tax rules, 401(k) basics and financial terminology. So there's an issue immediately to be tackled with better financial education focused on retirement plans.
Says the paper, “[W]e've noticed a large disconnect between the way 401(k) plans are designed and the average American's knowledge of financial terminology. 401(k)s were born out of an obscure section of a tax bill, and the level of complexity can be mind-boggling for the average employee.”
The problem is even worse when plans are riddled with “unusual provisions,” it adds.
That shuts employees out of engaging with their plans and discourages them from making higher contributions, but it also befuddles them when it comes to plan withdrawal options—the single topic participants struggle with the most.
Participants expend a lot of energy around potential withdrawals because of competing financial objectives – and here's where chatbots can be particularly useful. When participants ask questions about current or future medical expenses, concerns about the cost of college, worries about not making enough money, not feeling financially secure and/or prioritizing an upcoming home purchase, chatbots can strip the complications away from the question.
Regarding saving for kids' college instead of retirement for instance, a chatbot can point out that while their child can get student loans, parents can't get loans to finance their retirement and their kids could end up having to support them.
Eliminating jargon, taking away the intimidation factor and referring participants to humans when their questions are too complex—such as advice on investing—can simplify retirement plans and make them less offputting for participants.
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Marlene Satter
Marlene Y. Satter has worked in and written about the financial industry for decades.
