OREANDA-NEWS. June 07, 2016. Research from CREATE/Principal indicates more financial literacy is needed to help employees with retirement planning

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