Name: Principal Financial CEO on how to grow enough money to retire
Uploaded: 2023-01-31
Duration: 7 min 15 s
Description: Dan Houston has saving advice for individuals, employers, and policymakers

Dan Houston has saving advice for individuals, employers, and policymakers

Principal Financial CEO on how to grow enough money to retire

Leadership

Principal CEO on how to grow enough money to retire

great to see you again. This must be a difficult time for your customers at Principal financial. First there was the pandemic and all the disruptions that came with that and now we have all the volatility in the financial markets that's impacting many people's investment portfolios. What are the main concerns you hear the most from your clients these days? Well, the first thing I would say is a lot of our, a lot of our customers, our retirement plan customers and they tend not to get nervous, they tend not to make changes. So that's sort of my going in bed. But I would tell you one of our biggest challenges with employers is attracting retaining talent and employee benefits is a great way to do that. What's number one on their mind is labor more importantly, and I think more specifically to your question individuals, they're sticking to it, they're sticking to their plan. And that's one of things we encourage people to do is to have a plan and to know that there's going to be volatility and in those choppy waters know that you have to dollar cost average into the marketplace. So we're seeing very, very few people moving out of the market or moving the money market, these tend to be very long term investments because in large part we're more managing retirement plan dollars that won't even be used for another 20 or 30 years. Well, one concern that we hear a lot these days that people are worried about their, if they're gonna have enough money to retire or are they going to outlive their retirement savings. And that's why we're seeing many people not retiring and continuing to work when people raised About their long term financial health, what are your financial advisors in you tell them to do? Yeah. The first thing is you need to take full advantage of any sort of employer workplace savings opportunity, right? Because there's a couple of reasons many times employers make profiteering contributions, they make matching contributions. But over the course of your and I working careers, you've got to save about 15% between the employer and your employee over the lifetime career of your salary to replace 85% of your post retirement, your pre retirement income. And so when you think about it in that context, and the average deferral today being about 7.5 to 8% plus an employer match of another two or three were still underfunding our retirement plans by about a third. And this is why I know that you have been very concerned over the years that we've known each other about the issue of Financial security and that's why you created and just recently launched the global financial inclusion index. Tell us what does it measure? And what were the key findings. What it measured was through 42 different countries. Adequacy of the system and allowing a person to have financial well being retirement and how inclusive is it? It was measured across three spectrums, what the government does, what broad based financial services does, and lastly, what the employer does, number one on the list, top to bottom Singapore, number two, the good old United States. But the bottom line is we know that the top 15 had something in common and those things were that they had sort of equal weightings around government, broad based financial services and employer models in place to allow people to achieve financial success in retirement. Well, even though the United States came in at the in second place, in that ranking, the overall inclusion still fell short in a number of categories. And you point them out in your report, people who work full time, have more access to financial support than people working part time. And then of course, the so called gig workers, even less women are more excluded than men. Blacks and Hispanics have a harder time to find financial products, have access to them and financial support. What do you think needs to be done to correct these disparities? There's a number of things we can do. We all need to recognize individual individual retirement accounts are accessible to all their ubiquitous. You can get it from the principal financial group or any number of organizations. It's the payroll deduction through employers. That makes this so powerful. And I would tell you, I think you'll continuously products emerge which encourage gig workers, individual workers to voluntarily contribute to an ira and I think when you sort of peel it back susie and try to understand what's at the core, cause in many of these instances they just don't have the discretionary income to safer retire. That gets us into a debate about financial literacy, not in high school, but in elementary school. To start these kids off on the right path principle is very focused in the middle schools and high schools on this topic of financial literacy. And yes, it does take a long time, but you have to start somewhere in order to do that. This is a huge problem to solve. I mean, what do you think it's take to develop better financial help across the american population, especially when you're talking about basic things like just financial literacy, it does start there, it is financial literacy. So you get there one or two ways you can get there through a voluntary methodology of education around literacy, leveraging, employer leveraging, the platforms, the ecosystem that we know of today in the US or you can shift to a government retirement schemes. Most countries including the U. S. Are not in a financial position to do that, This is a really serious issue and we have to set people up for success, and the best way to do that is when they're very young just entering the workforce. You have also said that it takes leadership. I spent a lot of time on Capitol Hill advocating on the part of workers and small to medium sized employers and you know, I will tell you that there's very little reluctance. There is a strong desire around government to to do the right thing and to do everything we can to improve coverage and adequacy for american workers and it is as we all know, a system built on the private and public sector and we have to keep building on that. Well. Principal Financial has been around for more than 100 and 40 years and over all those years, it's been helping people uh, satisfy their financial needs. How would you say that what you're doing today is different than your predecessor? Do you know? It's not, I think it's just like it was in the beginning 100 and 43 years ago our our founder Edward Temple stood up a company on the basis of there must be a better way at the time policies, financial products and protection policies were not reliable and some dishonesty. And so the idea of shifting it and selling our products and services through banks and through financial services companies that had stronger reputations that continues on today. We still, when we think about products and services, there must be a better way. And so generation after generation, decade after decade, what we're trying to do is to create cost, affordable, simple solutions that help self solve problems, life insurance, disability, lifetime income and retirement. It's not a secret that the demand for those products is very high and principle just as fortunate to be 143 years and uh, you know, evolving ourselves to making sure that we stay ahead of the curve and making sure that our customers benefit from all of these years of experience.