Employers overwhelmingly say they want their plans to result in a secure retirement for workers. To better do so, they can use auto-enrollment and re-enrollment sweeps, increase default deferral rates to 6 percent or more, offer a diversified default option such as a TDF, and implement a match formula that encourages higher employee deferrals, according to the report.

Retirement plans are improving, according to Principal's 2019 Driving Plan Health report.

But gaps in preparedness remain, often exposed by generation.

See the article below for more and check out the slides that take a look at 5 trends from this year's report. (Photos: Shutterstock)

1.  Millennials showing strong improvement

Younger investors account for much of the overall improvement in plan health, the report says.

Participation: Over the six years, millennial participation increased from 53 percent to 61 percent.

Younger workers' participation rate is inching closer to older workers. Gen Xers participate at a 66 percent rate; boomers at a 68 percent rate.

Contribution: Thirty percent of millennials now have a total contribution rate of 10 percent or more, up from 23 percent six years ago. Thirty-seven percent of Gen Xers contribute at that rate; 47 percent of boomers do. Conventional wisdom holds that older workers make more money, and can contribute more to 401(k)s.

Diversification: Millennials lead the way in proper diversification, most likely because larger percentages are defaulted into target-date funds. Eighty-three percent of millennials are properly diversified, compared to 80 percent of Gen Xers and 78 percent of boomers.

2. Average deferral rate increasing across generations

• Millennials' average deferral rate increased from 5.2 to 5.9 percent.
• Gen Xers' average deferral rate increased from 6.2 to 6.9 percent.
• Boomers' average deferral rate increased from 8.2 to 8.9 percent.

Deferral rates by income range were pretty flat within most earnings demographics, with the notable exception among the lowest earners--those making less than $20,000 a year. In that demographic, the average deferral increased from 5.1 percent to 7.3 percent. For context, 7.3 percent of $20,000 is $1,460.

The average deferral of those making more than $100,000 is 10 percent. For those making between $60,000 and $79,000 it's 7.7 percent. For those making between $20,000 and $39,000, it's 5.7 percent.

3. Boomers showing worrisome income replacement rate

The index sets a healthy retirement income replacement rate at 80 percent of a saver's last income, accounting for 401(k) savings and Social Security.

Replacement rate measures are higher among younger earners, who make less money and therefore have less to replace. As income increases, the index shows replacement rates decreasing.

Boomers have an average income replacement rate of 41 percent. Nearly one-third are not participating in 401(k) plans, and of those that do, less than half are saving at least 10 percent of income, including the employer match.

But the report notes the replacement rate number for boomers may not be fully accurate, as the index does not account for other sources of retirement income, like IRAs and defined benefit plans.

Among boomers, only 25 percent of retirement income is expected to be from 401(k) plans, compared to 38 percent from defined benefit plans.

4. Retirees want to keep savings in plan, but few have a drawdown strategy in place

More than eight in 10 say they would prefer to stay in their workplace plan at retirement if they had a withdrawal strategy in place. But in reality, only 4 percent of retirees have set up a withdrawal strategy within their plan.

What explains the chasm? Several things, the report says:

1. For one, 14 percent of the plans in the index force savers out of the plan by age 70 ½ .

2. Only 27 percent of plans offer a managed account option, which could design a drawdown strategy in retirement. Only 2 percent of plans offered an immediate or deferred annuity option.

3. Almost three-quarters of retirees take all of their money out of their 401(k) within a year of leaving the workforce. Even in those plans that offer a structured distribution option, only 10 percent of retirees that leave money in plans take advantage of the option.

5. Closing the retirement readiness gap across all generations

Overall, the Plan Health Index is 22 percent, meaning that percentage of plans meet high participation, contribution, and diversification standards.

That's improved, but it still leaves a readiness gap among the generations.

How can the gap be closed? The study makes many recommendations, most of which are familiar:

Employers overwhelmingly say they want their plans to result in a secure retirement for workers. To better do so, they can use auto-enrollment and re-enrollment sweeps, increase default deferral rates to 6 percent or more, offer a diversified default option such as a TDF, and implement a match formula that encourages higher employee deferrals, according to the report.