Concern about Personal Financial Situation Highest in Five Years
But retirement planning, interest in employer benefits also on the rise
September 15, 2010 (Des Moines, IA) - American workers’ concern about their long-term financial future jumped to its highest level since third-quarter 2005, according to new research from the Principal Financial Well-Being IndexSM.
Seventy-five percent of workers and 61 percent of retirees are very concerned about their long-term financial future, both up significantly from the second quarter 2010. In addition, a third of workers and 22 percent of retirees said their stress level related to their personal financial situation is much higher than at the same time last year.
The Principal Financial Well-Being Index, which surveys both American workers at growing businesses with 10 to 1,000 workers and retired Americans, is released quarterly by the Principal Financial Group® and is conducted online by Harris Interactive®.
The findings reveal that financial worries in retirement are also growing. Forty-five percent of workers and 38 percent of retirees named being able to afford good medical care as a top issue that keeps them awake at night, up significantly from 40 percent of workers and 32 percent of retirees in third-quarter 2009. Another top cause of lost sleep is being able to enjoy the same quality of life I live now/lived before I retired, cited by 45 percent of workers and 35 percent of retirees (up from 41 percent and 31 percent respectively over last year).
Yet the number of Americans who are taking control of their finances for the long-term is also on the rise and, in some cases, workers are finding it easier to put money away for their golden years.
“The data confirms what economists are saying: although the economy is on the path to recovery, it will be a bumpy road,” said Luke Vandermillen, vice president of retirement and investor services at The Principal®. “Americans have little control over health care costs, but we’re pleased to see workers and retirees continue to take steps to control what they can – saving and spending.”
Nearly one out of five workers indicated they have increased their retirement savings in order to improve their financial well-being. A quarter of workers have created a plan for retirement, up from 17 percent in the third quarter of 2009, and half of workers say they have taken a greater interest in understanding the benefits they receive through their employer given the economic environment in the last year.
In addition, 27 percent of workers (up from 21 percent in 2008) are automatically enrolled into their employer’s 401(k) retirement savings plan.
“When the default option asks employees to ‘opt out’ rather than ‘opt in’ to a plan, participation rates jump dramatically,” Vandermillen said. “Retirement plans that include automated features help participants maximize their contributions and stay on track. It’s encouraging to see adoption of automatic enrollment on the rise.”
Americans doubtful about near-term economic recovery
Other signs that the road to recovery may be uneven are Americans’ sentiments about the economy and what will happen in the near future. About two out of five workers (39 percent) and retirees (44 percent) think the economy will worsen to some extent over the next year, up significantly from the second quarter 2010.
Echoing the sentiments of economists who use employment data as a barometer for gauging the economic recovery, Americans named jobs as the No. 1 indicator of whether the economy is on the right track, with 75 percent of workers and retirees responding that the unemployment rate is an important indicator in determining if the country is on the road to financial recovery. Consumer spending was also commonly selected (52 percent of workers; 60 percent of retirees) as well as home sales/new home construction (43 percent of workers; 56 percent of retirees). In addition, Americans also cited “non-scientific” gauges such as the employment status of friends, family and neighbors (46 percent of workers; 44 percent of retirees) as key indicators of economic health.
Other key findings include:
Misgivings about financial reform
- About two out of five workers (41 percent) and retirees (39 percent) think the financial reform bill will be either very ineffective or somewhat ineffective at preventing another financial crisis in the future.
Cutting back on back-to-school costs
- Over a quarter of workers (28 percent) anticipate spending less on at least one school related expense (clothes, activity/sport gear or school supplies) this year compared to last year.
Gulf oil spill impacts perception of gas prices
- Nearly two-thirds of workers (65 percent) and retirees (68 percent) believe the Gulf of Mexico oil spill will cause gas prices to either rise slightly or significantly in the near future.
See the full report, past results and a video of Vandermillen sharing top findings at www.principal.com/wellbeing.
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 28, 2010 and August 8, 2010 among 1,172 employees and 519 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.
This is one in a series of quarterly studies to identify and track changes in the workplace of small and mid-sized (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®) 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 $284.7 billion in assets under management and serves some 18.9 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.