New apps and programs might encourage people to save more money for their needs in retirement and improve their financial literacy, said speakers at Wednesday’s hearing of the Senate Special Committee on Aging. The meeting focused on retirement security.

“The days when most workers had secure pensions from having spent decades at the same company are largely gone — and we’ve got to find safe and innovative ways to encourage younger workers to start saving for retirement,” said Sen. Claire McCaskill (D-MO), ranking member of the committee. “The financial and technology sectors have teamed up to present savers with new options, and we’ve got to take a look at them to ensure proper oversight and increase options for future generations.”

Prizes for saving

Witness Brian Plum, president and CEO of Blue Ridge Bank in Luray, VA, told committee members that his bank was the first in the country to launch a prize-linked savings account. The “Jackpot Savings” account, he said, encourages people to save by offering monthly prizes and a larger annual grand prize.

“Each month we randomly select … one $200 winner and four $50 winners,” Plum said. “In 2015, we offered a $5,000 grand prize, and in 2016 the grand prize is $10,000. Each increase of $25 in an account generates a prize entry, so the more any one person deposits into his or her account the more likely he or she is to win.”

Prized-linked savings accounts are one type of solution that has been looked at by the nonprofit organization Doorways to Dreams, or D2D, which researches strategies that motivate and support people’s positive financial behavior, witness Tim Flacke told the committee. The account type, said Flacke, the organization’s executive director, “harnesses the allure of the lottery by offering consumers a chance to win cash prizes as a reward for savings behavior.”

Video games and apps

D2D, he added, also has developed a suite of online and mobile financial education video games, called Financial Entertainment, to capitalize on the popularity of video games. “Rather than offer them a pamphlet or website full of text on how to effectively manage their credit card, we encourage them to play a video game — one that decreases their stress, keeps them interested and allows them to practice the real world behaviors that will improve their lives,” Flacke said.

Office supply company Staples has customized D2D’s Bite Club game for its employees, he added. “In this game, users play the role of a vampire running a ‘day club’ who must begin saving for eternal retirement,” Flacke said. “While saving for their vampire within the game, employees had the opportunity to follow links to their own retirement plan provider’s website to learn more and increase contributions to their 401(k) accounts.”

D2D also developed a “gamified” web app and mobile app called SavingsQuest, he said. The system uses components of video games so that players can complete challenges, earn badges and level up while receiving savings tips and motivational messages. Users can make savings deposits in-app and are instantly rewarded with congratulations from a customizable dancing pig.

Witness Aron Szapiro, associate director of policy research at Morningstar and owner of HelloWallet, told committee members that users of the HelloWallet app have increased their retirement savings deferrals by 11% within three months of beginning to use the app and by 12% within a year. “These increases will help more workers prepare adequately for retirement,” he said.

The Retirement Manager application, Szapiro added, resulted in 87% of users increasing their retirement deferrals by an average of 28% once Retirement Manager recommended that they do so.

Retirement plan features

The committee also heard from Catherine Collinson, president of Transamerica Center for Retirement Studies and Transamerica Institute in Los Angeles. She said that the majority of employees find appealing the ideas of automatic enrollment in their workplace retirement plans and automatic escalation of contributions in their retirement plans, but the options are available only to a small number of workers, primarily those working at larger companies.

“In the course of our committee’s focus on retirement security, we revealed that the gap between what Americans have saved for retirement and what they will actually need stands at an astonishing $7.7 trillion,” said Sen Susan Collins (R-ME), chairwoman of the committee. “The reasons for this disparity are manifold. Fortunately, our hearing revealed that there are a number of innovative products and services that hold promise for improving retirement savings.”