Playing with money

Economics professor Teresa Ghilarducci, an ardent critic of the 401(k) system, created quite a buzz with a recent opinion piece, “Our Ridiculous Approach to Retirement,” in The New York Times.

Basing a retirement system on individuals’ voluntarily saving for 40 years and expecting inexperienced investors to reap the same results as professional money managers defies human behavior, wrote Ms. Ghilarducci, a professor at The New School for Social Research, author and expert witness before congressional committees.

“What results would you expect if you were asked to pull your own teeth or do your own wiring?” she asked in her July 21 Op-Ed. “This do-it-yourself pension system has failed.”

Roger Ferguson, chief executive of TIAA-CREF, which provides retirement plans to universities and other nonprofit entities, didn’t go quite so far in his recent remarks to the National Bureau of Economic Research’s annual retirement research consortium in Washington. But he ex- pressed concern that “far too many Americans lack the financial literacy skills to make sound decisions about the saving and investment choices that now rest squarely on their shoulders.”

“People with a high degree of financial literacy are more likely to plan for retirement,” he said, “and people who plan for retirement have more than double the wealth of people who do not plan.”

And what is the key to successful retirement planning? Drumroll, please: working with a financial adviser.

“We believe that making personal, objective advice available is key to good retirement planning,” said Mr. Ferguson, who noted that more than 3.5 million TIAA-CREF participants now have a full range of advice options available online, in person and over the phone.

USING ENTERTAINMENT

Financial advice may be the salvation for millions of older workers on the cusp of retirement. But the ultimate goal should be to improve the financial literacy of a new generation of Americans who will have to shoulder more responsibility for their retirement security.

How to do that?

Some experts think that “gamification” — the hot trend of using entertainment to encourage people to engage in desired behavior — is one potential solution. This is being applied to everything from market research and online shopping to primary education and employee training.

And now gaming may help improve financial literacy.

ING’S “STRUCT’

ING U.S. recently introduced a mobile game application called Struct to help build investment- and retirement-planning awareness for consumers of all ages. Think Angry Birds but with a vague reference to building a structure, aka portfolio, with a mix of materials, such as steel, wood and glass, that just happen to share some of the same strengths and risks of stocks, bonds and cash.

At 50-something, I am not much of a gamer and I thought the connection to personal finance was a bit obtuse, but clearly I am not part of the target demographic.

“By leveraging the popularity of mobile game apps, we believe Struct will entertain users while exposing them to important concepts,” said Rick Mason, president of corporate markets for ING U.S. Retirement.

HUGE AUDIENCE

The potential audience is huge, according to the Employee Benefit Research Institute, which estimates that there are about 140 million active gamers in America, more than double the number of people who are saving for retirement. Visit structgame.com to learn more.

Paul Hackleman, a public employer analyst for the International Foundation of Employee Benefit Plans, is the first to admit that retirement information is far from scintillating.

“The key to a successful employee education program is to use fun and entertainment as a hook to try to get individuals to grasp important concepts,” he said.

The foundation has developed an e-learning course called Money Matters: Your Budget that uses interactive games such as golf, bowling and soccer to reinforce comprehension of basic money management concepts. The course is designed to help employees get organized, set goals and develop a financial plan as a step toward building a secure retirement.

There is something oddly satisfying about hearing the plunk of a hole in one after successfully answering a quiz question at the end of a lesson.

What is the lesson for advisers? Clients have a range of understanding and variety of learning styles.

You have to meet them where they are.

To many, financial planning is a foreign language.

Don’t try to dazzle clients with the lingo.

Be their Rosetta Stone.

Mary Beth Franklin ([email protected]) welcomes your comments and suggestions for column topics. Twitter: mbfretirepro

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