They can create a false sense of security, especially if their components are not well understood, according to Jonathan Clements, the author of “How to Think About Money” and editor of the website HumbleDollar. Retirement calculators can vary widely based on assumptions like projected market returns or inflation, yet many investors overlook these complexities and effectively trust the black box calculations, Mr. Clements said.
“Those are the calculators that probably work best for most people, but they can be horribly wrong,” he said. Workers could underestimate the rising costs of living, for example, or fail to account for setbacks like a health crisis or divorce.
At Vanguard, the emphasis has shifted to eye-catching visuals and away from presenting lots of information in dense text, according to Shannon Nutter, a principal at Vanguard who oversees participant strategy. The firm’s research shows that people who log on stay on for less than 30 seconds, she said.
“We literally have a handful of seconds — 15 to 30 seconds — to catch their attention,” Ms. Nutter said. When shown a potential savings gap, 15 percent of people click on a visual element with the message “you need more money every month,” and of those who do, one-third take a step, such as increasing their contribution, she said.
Vanguard also began translating the benefits of increased savings into relatable, everyday sums, based on research showing that many people have a harder time intuiting percentages than they do monthly sums of money. For instance, telling savers to increase their contribution by the equivalent cost of two pizzas a month is more effective than telling them to sock away another one percentage point of their paychecks, Ms. Nutter said.
Fidelity, too, has moved away from displaying seemingly unattainable large dollar figures to presenting savings goals in more manageable terms. The firm built its website around this rule of thumb: aim to save the equivalent of a year’s salary by age 30, rather than amassing 10 times your salary by your retirement date, according to Jeanne Thompson, head of workplace thought leadership at Fidelity.
“It can be overwhelming for people. It is so far off, it’s hard to wrap their head around it,” Ms. Thompson said. “How do we break it down and make it more digestible?”