Plan sponsors should also ask about the percentage of participants that have logged on in the past year. Some users may log on once and never come back. Employers should try to sign on to the site and use it themselves to gauge its effectiveness, he says. "If you don't give someone the value they are looking for very, very quickly, you lose them," says Maggioncalda, adding that frustrated users may also tell co-workers how hard the site is to use. "You really get one chance to make a good first impression."

Monica Chandra, senior vice president of new product development at Fidelity Investments, the biggest provider of 401(k) retirement plans, saw Web registration rates increase to about 77% last year from about 70% in 2002. "One of the things we have learned is you need to be able to provide appropriate tools in the right context," Chandra says. While some Web sites make participants go to a separate area to access planning tools and educational material, Fidelity's site strives for integration, she says. For instance, participants coming onto the site to check account balances will also get a link to tools that will help them evaluate and manage asset allocations. "We provide you with what you would typically think of as a planning tool without ever having to show the word 'planning,'" she says.

Fidelity recognizes that sitting down to construct a comprehensive retirement plan can be too time-consuming for many people, Chandra says. To combat that, it has broken its planning tools down into simpler components. As participants use tools, the site collects information about their investments, risk tolerance and expected retirement date, enabling investors to work toward a more comprehensive retirement plan even if they can't devote large blocks of time to it. "If you have half an hour to go through the tools, that's great," she says. "But if you don't, we start to show you in smaller chunks what the plan might look like."

Web Leaders

Fidelity Portfolio Analysis, an asset allocation tool, is one of the site's most used areas, she says. It allows participants to see their exposure to different asset classes, and therefore risk, across their total portfolio, she says. "If you have an IRA, for example, we let you see what the combined effect is of your 401(k) and your IRA," Chandra says. "If you [want] to bring in other accounts, we let you do that as well."

Boston-based Fidelity ranked among the top five defined contribution Web sites for plan participants, according to a study released in February by kasina, a consulting firm focused on asset management companies. The remaining four, listed alphabetically, were JPMorgan Retirement Plan Services, Principal Financial Group, Putnam Investments and Vanguard Group. Kasina based its ranking on five categories–branding, content, online services, Web technology and usability–according to Megan Mergener, an analyst at New York-based kasina. The consulting firm found that while basic requirements relating to access and account information were being met, many sites weren't maximizing the Internet's potential and were hampered by low usability, a lack of worthwhile educational materials and a low level of participant usage. Kasina's study found that only 36% of plan participant sites included such basic features as a site map or search engine.

Like Fidelity's Chandra, Mergener says integration is important. For instance, if investors looking to check the performance of their funds run across unfamiliar terms, it's good if they can click on those terms and get a definition, she says. "Sites frequently do not link their educational content," she says.

Chris McNickle, a consultant at Connecticut-based Greenwich Associates, says that while retirement plan Web sites haven't lived up to expectations, those expectations were based on "irrational exuberance." While Web-based tools may be an excellent way for many people to plan for retirement, they aren't for the less "Web-savvy." Even those who are comfortable using Web-based tools may want additional confirmation that their choices are right. "People still need human advice, face-to-face advice, telephone advice, as well as written material," McNickle observes. "The best plans offer some combination of those different approaches to suit the needs of different people."

Use of Web-based planning tools should increase as people who grew up with the Internet get nearer to retirement, he says. To encourage use, plan sponsors should actively promote the sites through e-mail campaigns, company newsletters and in-person seminars to show people how to use them.

Knowing how to prepare for retirement is becoming increasingly important as companies move toward defined contribution plans and away from defined benefit plans, which promise to pay a specific amount to people who retire after a certain number of years. According to Greenwich, use of defined benefit plans by midsize companies fell to 43% last year from 49% in 2002. "Now that participants are being asked to save for their own retirement, they owe it to themselves to make sure they get the advice they need to make a smart decision," McNickle says.