Teach Investment Basics, Support Smart Investment Decisions

Research from CREATE/Principal indicates more financial literacy is needed to help employees with retirement planning

DES MOINES, Iowa--()--Longer life expectancy, coupled with rapid adoption of defined contribution retirement plans, is driving the need for more basic investment education worldwide, according to a report published today by CREATE-Research and Principal Financial Group®.

“Employees around the world are bearing the risk and responsibility of managing their retirement, and we must do more to help ensure they aren’t going to outlive their money,” said Jim McCaughan, CEO of Principal Global Investors. “Plan features such as auto-enrollment and default investment options have been an important first step to increasing participation, but they should be supplemented with education around the basic rules of investing.”

The paper, Financial Literacy: Smoothing the path to improved retirement savings, is the first of the CREATE/Principal series of three whitepapers which will discuss a variety of topics.

The first paper identifies how common missteps in retirement planning can be helped through increased participant education that emphasizes the basics of investing – key techniques, common risks and investment principles. The report found those basics missing from much of the guidance provided to plan participants.

“New government education initiatives are helping to close the knowledge gap, but a holistic approach is needed that includes plan sponsors, participants, financial advisors and asset managers,” said Dr. Amin Rajan, CEO of CREATE-Research and author of the report. “Participants need objective, jargon-free, emotionally-inspired education that shows how knowledge of investment basics can benefit their retirement nest egg.”

The report identified implications for all future retirees in managing their pensions, especially Millennials, who are expected to spend as many years in retirement as they do in the workforce if the retirement age doesn’t rise along with life expectancy.

“Even Millennials with advanced education and high income levels tend to have low levels of financial literacy,” said Dr. Rajan. “Fortunately, you do not have to become an expert to make progress in your retirement savings. Good plan design, coupled with a baseline understanding of the costs and benefits of major asset classes, will go a long way.”

The full white paper is available on: https://www.principalglobal.com/create/financial-literacy-smoothing-path-improved-retirement-savings

About Principal®

Principal helps people and companies around the world build, protect and advance their financial well-being through retirement, insurance and asset management solutions that fit their lives. Our employees are passionate about helping clients of all income and portfolio sizes achieve their goals – offering innovative ideas, investment expertise and real-life solutions to make financial progress possible. To find out more, visit us at principal.com.

About CREATE

CREATE-Research is an independent think tank specializing in strategic change and the newly emerging business models in global asset management. It undertakes major research assignments from prominent financial institutions and global companies. It also undertakes advisory work for senior decision makers in reputable organizations across Europe and the U.S.

Its work is disseminated through high profile reports and events which attract wide attention in the media. Further information can be found at www.create-research.co.uk.

Contacts

Principal Financial Group
Media Contact:
Cait Suttie, 515-362-2431
suttie.cait@principal.com
or
Jane Slusark, 515-362-0482
slusark.jane@principal.com

Contacts

Principal Financial Group
Media Contact:
Cait Suttie, 515-362-2431
suttie.cait@principal.com
or
Jane Slusark, 515-362-0482
slusark.jane@principal.com