Rising Pump Prices Don't Dampen Summer Vacation Plans - Yet - But Americans Compensate in Other Ways, According to Latest Principal Financial Well-Being Index
June 12, 2007 (Des Moines, Iowa) — While record prices at the pump don't seem to be fueling heightened concern over summer travel so far, Americans fear continued spikes could still dampen their summer vacation plans, according to the latest Principal Financial Well-Being IndexSM. Significantly fewer workers and retirees say the rising cost of fuel has influenced their holiday vacation plans this year compared with 2006, but many fear continued spikes could dampen summer plans yet. The index, which surveys American working adults at growing businesses with 10 to 1,000 employees, is released each quarter by the Principal Financial Group® and conducted by Harris Interactive®. It also surveys retired Americans in acknowledgment of the retiring baby boom generation.
While less than one-third (29 percent of American workers and 28 percent of retirees) said rising fuel costs have already influenced their holiday vacation plans, nearly half (47 percent of workers and 46 percent of retirees) fear a rise in costs could impact their summer plans. Feeling the pinch, some Americans may be compensating for the high cost of gas in other ways including influencing car purchasing decisions (33 percent of worker, 29 percent of retirees), carpooling or using alternative transportation (18 percent of workers, 9 percent of retirees), or changing fuel grade (14 percent of workers, 9 percent of retirees).
Rising Temperatures, Rising Financial Well-Being Confidence
"Summer temperatures aren't the only thing on the rise as Americans seem more confident about their financial well-being this season," said Dan Houston, executive vice president, Retirement and Investor Services, The Principal®. "While it doesn't appear rising fuel costs will derail summer plans for most, Americans plan to spend money improving their homes this summer. And most appear more confident about achieving the American Dream than just a year ago."
Summer Spruce Up — Put Your Money Where Your Mouth Is
The index revealed that vacation plans are not the only thing top of mind this summer for workers and retirees. Nearly half of workers (45 percent) and more than one-third of retirees (35 percent) plan to make home improvements this summer. When asked how they would pay for the improvements, a majority of workers (63 percent) and retirees (73 percent) indicated they would tap into their savings.
Dreaming About the Future
American workers are more confident when it comes to achieving "the American dream" than just a year ago. While more than half (56 percent) of workers agree that the American dream has been or will be harder to achieve than it was for their parents, the number has decreased significantly from the third quarter of 2005 when 70 percent of the workers indicated that it would be more difficult for them to achieve the American dream.
For the first time since 2004, half of workers (49 percent) listed their long-term financial future as being more important than their current job security (39 percent). The index also reveals that nearly half of workers (47 percent) are not at all concerned about their current job security, suggesting they are not worried about layoffs and are secure in their jobs. Three-fourths of workers (78 percent) indicated that their feelings about job security are not causing them to make any changes to their future career, and nearly two-thirds (61 percent) of the workers said they have no concerns about the future of their company.
Practice What You Preach
Houston commented, "The fact that an increasing number of workers and retirees are beginning to understand the importance of long-term financial security is a step in the right direction. But it's alarming to see that workers still grossly underestimate the 85 percent of pre-retirement income they should be saving toward retirement." The index revealed that an overwhelming 66 percent of workers believe they need less than 80 percent of pre-retirement income to maintain their current lifestyle. Retirees were even less realistic, with 73 percent saying they'll need less than 80 percent of their working income to live throughout retirement years.
Time for a Reality Check?
While workers indicated their long-term financial future is important, actions speak louder than words. When asked about financial planning checkups, 41 percent of retirees and 40 percent of workers indicated they have never had a financial planning checkup. Yet surprisingly, half of the workers and one-third of retirees have had their car in for a checkup four times or more each year. Two-thirds of both workers (66%) and retirees (67%) indicated they have not had a financial analysis conducted on any of several financial planning areas in the past three years, including retirement savings, life insurance, and savings goals.
Shrinking Retiree Healthcare Benefits
Healthcare costs are among the largest expense for many retirees, Houston said, and retiree healthcare benefits are causing increasing concern for both retirees and employees. According to the survey, half of workers said their current or past employer does not offer retiree healthcare benefits. Surprisingly, one-third of workers (33 percent) and 28 percent of retirees said they have no safety net in place if their employer-sponsored retiree healthcare benefits are eliminated. Many workers (37 percent) and retirees (30 percent) indicated they have a savings account in place should they lose their retiree healthcare benefits, but an alarming number (36 percent of workers and 32 percent of retirees) would have to dip into their retirement nest egg.
"With employers increasingly scaling back on both retirement and healthcare benefits, Americans must become more disciplined savers to shoulder the burden of both during retirement," said Houston.
Methodology
The Principal Financial Group® commissioned Harris Interactive® to conduct online research with employees (aged 18-plus) of small and midsized (SMB) U.S. businesses (firm size 10 - 1,000 employees) about their attitudes and perceptions regarding their financial well-being and their current employee benefits. To compare responses, Harris Interactive also interviewed a group of retirees. Harris Interactive conducted The Principal Financial Well-Being Index survey of 1,137 employees and 548 retirees from May 1 through May 7, 2007, using the Harris Poll Online. Data were weighted to be representative of the entire population of adult employees working for small to midsized U.S. businesses and retirees on the basis of age by gender, age, education, race/ethnicity, region, income, and propensity to be online. With a probability sample of this size, one can say with 95 percent certainty that the results have a statistical precision of +/- 2.9 percentage points for employees and +/- 4.2 percentage points for retirees; however, this was not a probability sample. This is one in a series of quarterly studies to identify and track changes in the workplace of small and midsized (growing) businesses. The first Principal Financial Well-Being IndexSM survey was conducted in the United States in 2000.
About the Principal Financial Group
The Principal Financial Group® (The Principal®)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 and national network of financial professionals. A member of the Fortune 500, the Principal Financial Group has $270.1 billion in assets under management2 and serves some 17.6 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.
About Harris Interactive
Harris Interactive is the 12th largest and fastest-growing market research firm in the world. The company provides innovative research, insights and strategic advice to help its clients make more confident decisions which lead to measurable and enduring improvements in performance. Harris Interactive is widely known for The Harris Poll, one of the longest running, independent opinion polls and for pioneering online market research methods. The company has built what it believes to be the world's largest panel of survey respondents, the Harris Poll Online. Harris Interactive serves clients worldwide through its United States, Europe and Asia offices, its wholly-owned subsidiaries Novatris in France and MediaTransfer AG in Germany, and through a global network of independent market research firms. More information about Harris Interactive may be obtained at www.harrisinteractive.com.
To become a member of the Harris Poll Online and be invited to participate in online surveys, register at http://www.harrispollonline.com/.
1) "The Principal Financial Group" and "The Principal" are registered trademarks of Principal Financial Services, Inc., a member of the Principal Financial Group.
2) As of March 31, 2007.
