Victor Ricciardi, finance professor at Goucher College in Baltimore and co-editor of the book "Investor Behavior: The Psychology of Financial Planning and Investing" with H. Kent Baker, said a simple question can explain his reservations about behavioral finance approaches being too broad-based: "Engagement doesn't take into account the full person. If you encourage someone who has $10,000 in credit card debt to throw money into a retirement account, is that a good policy?"
3. Blanket messaging based on fear and greed are risky ...
There isn't a study on the state of retirement in the U.S. released over the past decade that doesn't include some version of the message that Americans aren't saving enough and the implications are dire.
The impact of all these scare tactics? Not sufficient, said David Musto, CEO of J.P. Morgan Retirement Plan Services.
"We still have low participation rates in 401(k) plans, and the average income-deferral rates, while we've seen some improvement, is still around 6 percent," he said. "Most would agree saving [at least] 10 percent would be better."
When it comes to behavioral finance and decision-making, auto enrollment is just a start, and providing estimates of retirement-balance shortfalls fall far short of the mark in spurring participants to save more.
(Read more: 40-plus is not too late to save for retirement)
"One of the challenges of educating people is [that] the baseline message can be depressing," said Don Hess, head of product development for J.P. Morgan Retirement Plan Services.
The company at one time relied more on blanket and fear-based messaging, telling employees how much they were on track to have in retirement and how much that left them to make up if they wanted to have a secure retirement—the gap was typically large. "That message worked horribly," Musto said, because it shows the company doesn't know their personal life situation. "Who could make up that amount?"
Hess agreed. "A simple question around what the participant will draw down in retirement will have an answer that is radically different, based on age and family history and Social Security and the tax basis of money in retirement."
Now J.P. Morgan Retirement Services uses a less judgmental approach, focusing on the concept of "social norming" or, in plain English, showing your progress relative to your peers and, if they are on track to be successful savers, showing you how they got there.
"We don't say, 'This is what you need'; we say, 'Here is what you are on track to achieve, and if you were to increase by 2 percent, that number would change to y,'" Musto said. "It's not frightening them."