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The Principal: 401(k) Participants Using Online Tool Defer 39% More

Milestones users average 8.9% deferral rate; non-users average 6.4%

February 28, 2011 (Des Moines, IA) - Retirement plan participants who have completed My Principal® Edge Milestones (Milestones), an interactive tool available at www.principal.com, are saving an average of 39 percent more for retirement than those who have not used the tool, according to new analysis from the Principal Financial Group®.

Nearly 94,000 participants covered by 401(k) plans through The Principal® have completed the online tool, which analyzes retirement savings needs and provides a simple, personalized guide of actions to help participants meet a specified retirement savings goal. The average deferral rate for a sample group of Milestones users[1] is 2.5 percentage points higher (8.9 percent) than those who have not completed Milestones (6.4 percent).

“The higher savings rate by Milestones users has the potential to translate to an additional $150,000 at retirement[2] ,” said Barrie Christman, vice president of individual investor services at The Principal. “That figure, which is no small sum, tells us that those who take advantage of retirement education and planning tools tend to demonstrate better savings behavior.”

In 2010, nearly 30,000 participants used Milestones for the first time. Of a sample group of those participants[3]:

  • 46 percent either started deferring or increased their deferral amount
  • Participants who started deferring for the first time did so at a 7 percent higher rate (7.3 percent) than the overall average deferral rate for all participants covered by a 401(k) plan through The Principal (6.8 percent)
  • Participants who bumped up their deferral after completing Milestones increased it at a rate of 56 percent (from 7.0 percent deferral to 10.9 percent deferral)

The Milestones tool, launched April 2008, requires just a few key pieces of information from participants to help identify shortfalls in retirement savings. The most frequent actions taken after completing Milestones include increasing deferrals, adjusting asset allocation and rebalancing accounts.

Further analysis of participants with a known employer match who completed Milestones shows nearly 57 percent have an annual contribution of more than 11 percent toward retirement, including employer match[4].

“Access to education and planning tools, such as Milestones, helps drive better outcomes at retirement,” Christman said. “These types of resources can help participants get to that 11-15 percent range–including employer match–where we believe they should be to generate sufficient retirement income.”

For more news and insights from The Principal, connect with us on Twitter at http://twitter.com/ThePrincipal.

About the Principal Financial Group

The Principal Financial Group® (The Principal®)[5] 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 $318.8 billion in assets under management[6] and serves some 19.1 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.

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[1]
Base of 20,850 participants under salary deferral service who completed Milestones.
[2]
Corporate common assumptions include 30 years of saving from age 35 to age 65, starting salary of $35,000 with annual wage growth rate of 4 percent and annual investment return of 8 percent. Actual amount is $157,620.
[3]
Base of 15,920 participants under salary deferral service who completed Milestones in 2010.
[4]
Base of 3,201 participants, under salary deferral service in plans with stated match formula, who completed Milestones.
[5]
"The Principal Financial Group" and "The Principal" are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
[6]
As of Dec. 31, 2010.

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