News release

Vanguard Leverages Behavioral Research And Digital Technology To Help Improve Retirement Readiness of 401(k) Participants

VALLEY FORGE, PA (September 27, 2017)—Vanguard announced today a new personalized online and digital experience for defined contribution (DC) plan participants designed to improve their retirement readiness. Vanguard, the largest manager of DC plan assets in the world,1 draws on decades of behavioral research and sophisticated technology to provide more than 4.4 million participants with a snapshot of their current retirement savings and serve up simple, customized actions that they can take to further their savings goals.

“Part of Vanguard’s core purpose is to help investors achieve retirement success, and we are continuously evolving our technology capabilities and digital communications to improve the 401(k) participant experience,” said Lauren Valente, head of Participant Experience and Recordkeeping Services for the Vanguard Institutional Investor Group. “Our reiterative, test-and-learn approach ensures we are using the right technology, channels, and messages for plan sponsors to best reach employees and help drive better retirement outcomes.”

New online experience designed to improve savings

Vanguard’s new participant web portal was designed to provide investors with a clear, holistic snapshot of their future retirement. When logging onto the new web home page, participants are immediately presented with two key metrics and a recommendation:

  • Account balance: Shows participants how much money they have saved for retirement today.
  • Retirement readiness indicator: Leverages integrated analytical technology to measure progress towards retirement goals such as an estimate of future monthly income.
  • Next steps: Provides participants with a personalized nudge in the right direction by suggesting the next best action to get on track—and stay the course—for retirement. 

The Vanguard Retirement Readiness Tool is the proprietary technology underlying the new web page that aggregates data, including current plan savings, Social Security, and other outside assets. The tool uses assumptions, such as future contributions and forecasts from the Vanguard Capital Markets Model, to project how savings will grow over time. Applying an adjustable 4% withdrawal rule, participants are able to see an estimate of their future monthly retirement income—refreshed upon each login to maintain an up-to-the-minute accurate picture. 

The Retirement Readiness Tool also makes it easy for participants to refine their estimates by changing different variables, and offers the option of running helpful “what-if” scenarios. For example, participants can see how their retirement income might change based on different retirement ages. Most importantly, this tool lets participants know whether they are on track to have sufficient income in retirement. For those who aren’t on track, the platform serves up a specific corrective action—called a nudge—that can be accomplished in a few simple clicks. 

“For many investors, retirement can be an intangible, far-off concept with loosely defined goals,” Ms. Valente said. “We leverage our methodologies and capabilities to provide participants with a clear estimate of their savings and income for their retirement years, and deliver it in a way that is comprehensive and meaningful to them. This enables them to make financial choices now that can dramatically impact their future.” 

Communications have evolved to be customized, personalized, and more effective

In addition to the new online experience, Vanguard’s Personalized Participant Journeys represent the next evolution in participant outreach and communication. Rooted in behavioral finance, Personalized Participant Journeys utilize a test-and-learn approach and big data analytics to deliver the right message at the right time to encourage a participant to take his or her next best action. 

Vanguard has seen wide adoption by plan sponsors and positive participant outcomes. Nearly 99% of Vanguard plan sponsors have now adopted Personalized Participant Journeys. In the past year, more than 283,000 participants have taken action to help improve their retirement readiness, such as enrolling in the plan, increasing savings rates, and updating beneficiaries. 

As an example, for a participant who might not be saving sufficiently to reach the company match, communication is coordinated across multiple channels (including e-mail, the new web home page, and online education) to help nudge the participant to save more and take advantage of “free money.” The communications are highly personalized—taking into account the participant’s current savings rate, company’s match, and targeted retirement age—to offer a more relevant view that this small increase in savings could have on their overall retirement account balance. The call to action is a nudge—a simple click on the website to increase the savings rate.

Vanguard: A leader in plan design

With more than $950 billion in DC assets under management, Vanguard serves as recordkeeper and strategic partner to more than 5,900 plan sponsors—helping them to build smarter, stronger DC plans for approximately 4.4 million participants. Vanguard has long been recognized as an industry leader in DC plan design, providing sponsors with the investment options, technology, tools, services, and research to help prepare participants for retirement. Through plan design tools like automatic enrollment, automatic escalation, and Personalized Participant Journeys, Vanguard is helping plan sponsors overcome participant inertia to better ensure their employees are saving effectively for retirement. 

About Vanguard

Vanguard is one of the world’s largest investment management companies. As of August 31, 2017, Vanguard managed $4.6 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers 371 funds to its more than 20 million investors worldwide. For more information, visit


Pensions & Investments, December 31, 2016. 

All investing is subject to risk, including the possible loss of the money you invest. 

Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. 

IMPORTANT: The projections and other information generated by the Vanguard Capital Markets Model regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. VCMM results will vary with each use and over time.

The VCMM projections are based on a statistical analysis of historical data. Future returns may behave differently from the historical patterns captured in the VCMM. More important, the VCMM may be underestimating extreme negative scenarios unobserved in the historical period on which the model estimation is based. 

The Vanguard Capital Markets Model® is a proprietary financial simulation tool developed and maintained by Vanguard’s primary investment research and advice teams. The model forecasts distributions of future returns for a wide array of broad asset classes. Those asset classes include U.S. and international equity markets, several maturities of the U.S. Treasury and corporate fixed income markets, international fixed income markets, U.S. money markets, commodities, and certain alternative investment strategies. The theoretical and empirical foundation for the Vanguard Capital Markets Model is that the returns of various asset classes reflect the compensation investors require for bearing different types of systematic risk (beta). At the core of the model are estimates of the dynamic statistical relationship between risk factors and asset returns, obtained from statistical analysis based on available monthly financial and economic data from as early as 1960. Using a system of estimated equations, the model then applies a Monte Carlo simulation method to project the estimated interrelationships among risk factors and asset classes as well as uncertainty and randomness over time. The model generates a large set of simulated outcomes for each asset class over several time horizons. Forecasts are obtained by computing measures of central tendency in these simulations. Results produced by the tool will vary with each use and over time.