Retirement Readiness
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Gain insight from a financial professional and plan sponsor who use our retirement readiness approach.
At the Principal Financial Group®, we define "retirement readiness" as the degree to which a participant is on target for meeting and maintaining income goals throughout retirement.
But how do employees know how much to save and how much income they may need in retirement?
We believe employees need to save at an estimated savings rate of 11-15% (a combination of individual and employer contributions over an entire working career)[1], [3] in order to replace 85% of their incomes at retirement.[2]
Are your employees on track to reach their retirement saving goals?
To help your employees get there, we suggest three steps:
- Strategic measurement: we provide a Retirement Readiness Report to plan sponsors that measures key metrics to help track the success of the retirement plan.
- Plan design changes: by following some key plan design best practices, you can design your plan to help optimize your employees' opportunities to become more ready for retirement.
- Goal driven education: our education is action-oriented and focused on achieving a more sufficient level of income during retirement.
Help your employees get retirement ready
- How plan design may impact participation and contribution rates
- Participant Savings Rates & Income Replacement Ratios
- Our View on Retirement Readiness: How to Move from a "Popular" Plan to a Successful Plan
Related reading
- Employers Say Retirement Plan Success Fueled by Tax Deferrals
- Replacement Ratio Tool Measures Retirement Plan Success
- Summary of 2011 Retirement Ready Survey
- [1]
- 2011 Principal Financial Group Retirement Readiness Survey commissioned by the Principal Financial Group, conducted by Harris Interactive online. The data was gathered May 17 through June 17, 2011 from 1,300 employers.
- [2]
- Assuming pre-retirement annual gross income of $40,000. Aon Consulting 2008 Replacement Ratio Study.
- [3]
- Our View on Retirement Readiness: How to Move from a "Popular" Plan to a Successful Plan, the Principal Financial Group, September 2011.The estimate assumes a 40-year span of accumulating savings, as wellas the following facts: Retirement at age 65; Social Security providing 40% replacement of income; annual market returns of 7%; annual inflation of 2.5%; annual wage growth of 3.5% over 40 years inworkforce. The assumed rate of return for the study was hypotheticaland does not guarantee any future returns nor represent the return ofany particular investment. Contributions do not take into account theimpact of taxes on pre-tax distributions.
