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Lesson Learned? Americans Monitor Spending as Economy Improves

Continued focus on saving, staying the course one year after start of financial crisis

September 15, 2009 (Des Moines, IA) — New research released from the Principal Financial Well-Being IndexSM indicates that while the economy is stabilizing, Americans still have not forgotten the lessons from the economic downturn that began a year ago and are keeping a tight rein on spending. Ninety-four percent of Americans say their overall spending is the same or less than in the previous quarter.

"This economy taught Americans to spend less and save more," said Dan Houston, president of retirement and investor services at the Principal Financial Group. "It's crucial that we don't forget those lessons and continue to save responsibly for the long term."

Further, when asked what keeps them awake at night, 44 percent of workers responded that concern over being able to afford/pay for the basic necessities prevents them from sleeping soundly. Another 41 percent worry about maintaining the same quality of life.

The Principal Financial Well-Being Index, which surveys both American workers at growing businesses with 10 to 1,000 employees and retired Americans, is released quarterly by the Principal Financial Group® and commissioned by Harris Interactive®.

Retirement Confidence Improves

More workers say that their retirement balances are rising or at least no longer declining. According to the survey findings, the percentage of workers who say their balance is the same or higher than it was on Jan. 1, 2008, has doubled from last quarter (18 percent vs. 9 percent). The percentage of workers who feel it will take less than two years to recover has increased significantly from last quarter (16 percent vs. 11 percent).

"While our economy still has a long way to fully recover, there are many positive signs that retirement portfolios have started to rebound nicely," Houston said. "Workers and retirees have not given up on their investments and retirement strategies and are holding steady."

Some workers are taking action to help rebuild their retirement balance more quickly. The survey found 11 percent of workers have actually increased the amount they are contributing to their 401(k)s.

Have a Plan for Retirement? Retirees Say Plan Early and Often

Most workers (83 percent) say they do not have a plan for the transition to retirement, and of those workers who do have a plan, approximately four in 10 (43 percent) have an actual written plan. "Having a proper plan in place is just as important as saving for retirement," Houston said. "Without a plan or any knowledge of what your life will be like after working, you can't effectively save for what you will need."

Many retirees wish they had planned and saved earlier. Seventy-three percent of retirees said they would start learning more about spending and investing in retirement more than 10 years before retirement if they could do it over again. Surprisingly, 10 percent of retirees did not start thinking seriously about how to manage their spending and investments in retirement until they were retiring.

More retirees are also seeking professional financial help to assist in managing their money since the economic downturn began. Thirty-four percent of retirees have an adviser who either manages their money or helps them manage their money on their own, a significant increase from 25 percent last year. Almost two-thirds of retirees (63 percent) are managing their retirement money on their own; however, this is down significantly from 76 percent last year.

Other key survey findings:

  • College funds suffer as parents struggle to pay the bills
    • Approximately one in 10 (12 percent) of workers who have a college fund established for their children have dipped into it to cover day-to-day living expenses.
  • Voluntary benefits are easy and affordable
    • While just over one-fifth (22 percent) of workers have never participated in any voluntary benefits, 70 percent of workers who participate in voluntary benefits have continued to participate despite economic conditions.
    • Three-fourths of the employees say they purchase voluntary benefits at work because of the convenience of payroll deduction. Nearly two-thirds (65 percent) purchase voluntary benefits at work because of low group rates.
    • The top purchased voluntary benefits were dental (62 percent), vision
      (40 percent) and short-term disability (27 percent) coverage.

See the full report and past results at www.principal.com/wellbeing.

Methodology

This Principal Financial Well-Being IndexSM survey was conducted online within the United States by Harris Interactive on behalf of the Principal Financial Group® between July 30, 2009, and Aug. 11, 2009, among 1,147 employees and 558 retirees. Results were weighted as needed for age by gender, education, race/ethnicity, region and household income. Propensity score weighting was also used to adjust for respondents' propensity to be online. No estimates of theoretical sampling error can be calculated; a full methodology is available.

This is one in a series of quarterly studies to identify and track changes in the workplace of small and midsize (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. A member of the Fortune 500, the Principal Financial Group has $257.7 billion in assets under management[2] 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.

[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, 2009
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