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New Analysis from The Principal Reveals Keys to Retirement Plan Success

Report says savings rate trumps investment performance

May 25, 2010 (Des Moines, IA) - As financial professionals and their employer clients focus on helping American workers recoup market losses and rebuild retirement savings, a new report analyzes which factors help the most—and it's not investment performance.

Pursuing Retirement Plan Success during Participants' Accumulation Years from the Principal Financial Group® measures the impact on retirement account balances of three key variables: investment performance, asset allocation and the amount the participant is saving.

The report finds that while investment performance and asset allocation are important factors, the participant's savings rate has the greatest impact on their account balance over time—and thus on the overall success of the retirement plan.

"Ultimately, the best way to measure a retirement plan's success is by how much participant account balances increase over time," said Tim Minard, senior vice president of retirement and investor services at The Principal®. "Our analysis shows that the main driver of account balance size over time is the participant's rate of salary deferral. That involves the critical challenge of motivating participants to change behavior."

The report concludes the most effective way to change participant savings behavior is a combination of automated plan design features with strong education and access to a broad investment platform that includes target date funds.

"Financial professionals play a critical role in helping plan sponsors take the kind of multi-faceted approach that is needed to drive change," said Minard. "Financial professionals can use the analysis in this report to help their employer clients improve the success of their retirement plans."

About the Principal Financial Group

The Principal Financial Group® (The Principal®)[1] is a leader in offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement and investment services, life and health insurance, and banking through its diverse family of financial services companies. A member of the Fortune 500, the Principal Financial Group has $293.4 billion in assets under management[2] and serves some 18.7 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.

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[1]
The Principal Financial Group and The Principal are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
[2]
As of March 31, 2010.
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