2005 Retirement Confidence Survey: How to Increase Worker Savings? 401ks Provide Ideas.

WASHINGTON -- What does it take to get workers to save more in their retirement plan? Based on the 401(k) experience, the message from workers is clear: Show me the money--the matching money--according to the 2005 Retirement Confidence Survey (RCS) released today.

New questions in the 15th annual RCS included a range of options that could persuade workers not contributing to their employment-based retirement savings plan to participate. Nearly three-fourths (72 percent) said an employer matching contribution of up to 5 percent of their salary would make them much more likely or somewhat more likely to participate in a retirement savings plan at work.

The survey was conducted by the nonpartisan Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates, Inc. and was underwritten by the Principal Financial Group,(R) the nation's 401(k) leader and total retirement solutions innovator. The study found that a majority of workers not contributing to their employer's retirement plan cited three other factors that also could make them more likely to participate in a workplace saving plan:

--An investment option that automatically provides workers a more conservative investment allocation as their retirement date approaches, such as the "lifestyle" funds some providers currently offer (cited by 66 percent of nonparticipating workers).

--A provision that automatically raises workers' contributions by a fixed amount or percentage when they receive a pay raise (cited by 55 percent of nonparticipating workers).

--A matching contribution by the employer of up to 3 percent of workers' salary (cited by 51 percent of nonparticipating workers).

Less than half of workers not contributing to their employer's plan backed two other options: 49 percent said they would be more likely to participate in a retirement savings plan that included a set of mutual fund investment options with a pre-set mix of conservative, moderate and aggressive investments; and 35 percent said they would be more likely to join a plan in which a professional financial manager made investment decisions based on the results of a questionnaire workers completed.

According to Dan Houston, senior vice president at the Principal Financial Group, "The EBRI research validates what plan sponsors, individual investors and their advisors tell us every day. They want more "do-it-for-me" tools and services to meet their long-term security needs, such as target date funds, professionally managed accounts and automatic deferral step-up programs. In fact, according to our recent Principal Financial Well-Being Index (a regular study of American workers' views on financial security) workers are increasingly concerned about their long-term financial futures. Workers are finally getting the message that their employer-sponsored benefits are extremely important to their future security."

Currently, more than 3 in 4 eligible workers (78 percent) are offered retirement plans where employers match all or part of their workers' contributions, the survey found. Eighty-two percent of eligible workers said they signed up for their employer's retirement savings plan. About two-thirds (66 percent) of noncontributing workers said automatic enrollment in a retirement plan upon being hired would make them very likely or somewhat likely to participate.

The new Retirement Confidence Survey findings are of particular relevance as Congress debates restructuring Social Security to provide voluntary individual investment accounts: Even if such accounts were created, the currently low national savings rates suggests there would be challenges getting many people to use them.

And concerning Social Security, the survey found that nearly 7 in 10 (68 percent) of today's workers are skeptical that Social Security will be able to provide them benefits of at least equal value to those current retirees receive. This proportion has remained relatively constant in recent years and did not change in the 2005 RCS, even as policymakers began discussing major changes in the federal pension system.

The RCS, first released in 1991, is a comprehensive study of the attitudes and behaviors of American workers and retirees toward saving, retirement planning, and long-term financial security. Complete RCS results are available on the EBRI Web site at www.ebri.org

About the Principal Financial Group

The Principal Financial Group(R) (The Principal (R))(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 $168.7 billion in assets under management(2) and serves some 14.9 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.

(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 December 31, 2004