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Survey Says: American Workers Fret Over Rising Prices, Cut Spending; Financial Woes Cause Sleepless Nights

American Workers Say Economy/Jobs are Top Concerns in Presidential Election

September 8, 2008 (Des Moines, IA) — Current economic conditions are cutting deeper into Americans’ pocketbooks as significantly more workers (61 percent, up from 56 percent) and retirees (61 percent, up from 55 percent) cut overall spending even further this quarter compared with second quarter 2008, according to the latest Principal Financial Well-Being Index^SM.

The index, which surveys both American workers at growing businesses with 10 to 1,000 employees and retired Americans, is released each quarter by the Principal Financial Group^® and conducted by Harris Interactive^®.

According to Dan Houston, president of Retirement and Investor Services at The Principal^®, “The evidence shows that Americans are continuing to retrench during this economic slump. That’s good news because today’s level of consumer spending is not sustainable,” he said. “But the true balancing act now is for Americans to keep their long-term savings plan firmly in place while still coping with short-term financial challenges.”

Financial woes keep Americans awake at night

The index revealed that the vast majority of American workers (71 percent, up from 67 percent a year ago) are concerned about their long-term financial security, and significantly more Americans this year compared to last are losing sleep over it. The biggest financial worry that keeps them awake at night is the ability to pay for basic necessities during retirement (up significantly to 48 percent from 38 percent a year ago). Workers are equally concerned that they won’t be able to afford good medical care or sustain the same quality of life they currently enjoy in retirement (up significantly to 44 percent from 39 percent). Retirees, on the other hand, say their sleepless nights are due to the rising cost of inflation eating into their purchasing power during retirement (up dramatically to 44 percent from 28 percent). They also are concerned about their ability to maintain the same quality of life they enjoyed before retirement (up significantly to 30 percent from 20 percent), affordability of good medical coverage (30 percent from 29 percent), and ability to pay for even basic necessities (29 percent, up from 21 percent).

Despite retirement worries, Americans still delay planning

While retirement funding worries are keeping American workers awake at night, nearly a third (31 percent) still have not planned for retirement. Even more alarming, Houston said, nearly a quarter of retirees (22 percent) didn’t even begin to think seriously about retirement finances until they had retired. But looking back, 71 percent of retirees wish they would have begun planning more than a decade before retiring.
“Hindsight is always 20-20. This should serve as a wake-up call to American workers who still have time on their side,” Houston said.

Other key survey findings:

• Presidential Election — 2008:
  • Workers’ top concerns this election season are the economy/jobs, up dramatically to 79 percent from 52 percent a year ago. Economy and jobs leapfrogged over previous issues of greater concern including war and health care.
  • But only about one-third (35 percent) of workers are confident that one or more of the presidential candidates is capable of effectively dealing with the issue.
• Economic Slowdown: In response to rising grocery and consumer prices, workers are:
  • Eating out less (81 percent, up from 79 percent just last quarter)
  • Spending less on clothing and other consumer items (75 percent, up from 74 percent)
  • Cutting back on entertainment (75 percent, down from 76 percent)
  • Driving less to save gas money (59 percent, up from 52 percent)
• Increased Fuel Costs: Significantly more workers this quarter made cuts to compensate for rising fuel costs:
  • 61 percent (up from 56 percent last quarter) are driving less
  • 43 percent (up from 36 percent) are spending less on basic necessities
  • 12 percent (up from 7 percent) have fallen behind on monthly bills
  • 74 percent of retirees (up from 56 percent) are driving less
• Retirement Income Confidence:
  • Only 58 percent of workers and 80 percent of retirees feel confident they will have enough money to take care of even basic expenses during retirement
  • Only 53 percent of workers and 73 percent of retirees think they will have a retirement that is at least as affluent as their parents’
  • Only 42 percent of workers and 61 percent of retirees are confident they will not have to worry about financial matters during retirement
• Managing Retirement Savings:
  • 65 percent of workers said having a guaranteed monthly income was more important than having a contingency plan in case of a medical illness (60 percent)
  • 59 percent of workers said growth in account value was important
  • Retirees said a guaranteed monthly income was most important (59 percent), while cost of living adjustments (56 percent) ranked second

Methodology

This Principal Financial Well-Being Index SM survey was conducted online within the United States by Harris Interactive on behalf of the Principal Financial Group® between July 31-Aug. 11, 2008, among 1,331 employees and 726 retirees. 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.

Employees consisted of adults 18 and older who work at small and midsized (SMB) U.S. businesses (firm size 10-1,000 employees). Retirees consisted of adults age 60 and older who reported they are retired or those who are employed part-time or self-employed and have retired from a previous career. Results were weighted as needed for age by gender, education, race/ethnicity, education, region, and household income. Propensity score weighting was also used to adjust for respondents’ propensity to be online.

All sample surveys and polls, whether or not they use probability sampling, are subject to multiple sources of error, which are most often not possible to quantify or estimate, including sampling error, coverage error, error associated with nonresponse, error associated with question wording and response options, and post survey weighting and adjustments. Therefore, Harris Interactive avoids the words “margin of error” because they are misleading. All that can be calculated are different possible sampling errors with different probabilities for pure, unweighted, random samples with 100 percent response rates. These are only theoretical because no published poll comes close to this ideal.

Respondents for this survey were selected from among those who have agreed to participate in Harris Interactive surveys. The data have been weighted to reflect the composition of the entire population of adult employees working for small to midsized U.S. businesses and retirees. Because the sample is based on those who agreed to be invited to participate in the Harris Interactive online research panel, no estimates of theoretical sampling error can be calculated.

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. A member of the Fortune 500, the Principal Financial Group has $304.2 billion in assets under management² and serves some 18.8 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 a global leader in custom market research. With a long and rich history in multimodal research that is powered by our science and technology, we assist clients in achieving business results. Harris Interactive serves clients globally through our North American, European and Asian offices and a network of independent market research firms. For more information, please visit www.harrisinteractive.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 June 30, 2008