Principal Financial Well-Being Index Reveals Increasing Anxiety Over Workplace Matters And The Wallet
October 6, 2004 (Des Moines, Iowa) - The Principal Financial Group® today released findings from its third-quarter 2004 Principal Financial Well-Being IndexSM showing that American workers (at firms with 10-1,000 employees) continue to live in a state of worry about their financial security. The index also shows that, compared to prior periods, workers are more concerned about their long-term financial future, and are relatively unhappy about their current financial well-being.
The index, released twice annually by The Principal® and conducted by Harris Interactive®, reveals that scarcely one-fourth of American workers (26%) said they are extremely happy about their current financial well-being, compared to 34% in the first quarter 2004. Workers are also pessimistic about the long-term, with a vast majority (78%) saying that they are very concerned about their long-term financial future (consistent with 76% in first-quarter 2004).
Pressure on the Job
As the election nears, the country's economic recovery has not gained enough steam to keep American workers from worrying about their job security. "The survey shows the key areas that are top-of-mind with American workers during this election season - the economy and jobs," said Daniel J. Houston, senior vice president, The Principal.
When asked what issues they are most concerned about in the November Presidential election, 81% of American workers said the economy and jobs. Health care (71%), homeland security (60%) and financial well-being (58%) rounded out the list of top election concerns.
The results seem to indicate that anxiety over the economy and jobs is being driven partly by people working longer hours. Nearly a third of American workers (30%) said they are working a longer work week this year compared to the same time last year. This is up significantly from the first quarter 2003 study, when only 22% said they were working more. Also, 16% of employees agreed that they would actually lose vacation time this year because they can't afford to take the time off.
While they are working more, people are also spending more due to dramatic price inflation on daily consumer goods. Of the workers surveyed, 97% have seen an increase in weekly spending on basic items, such as gasoline and groceries, due to the rising cost of those goods. More than two-thirds (71%) estimate they are spending more than $25 additional per week, and 28% are spending more than $50 additional per week compared to last year.
One hot button workplace issue that has received a lot of attention during the election season has been the trend of job outsourcing overseas, but the majority of American workers are indifferent to outsourcing's impact on them. A majority (58%) said they are unconcerned about their own job being shipped overseas. Only 23% of American workers are very or somewhat concerned about their job being outsourced abroad.
Retirement Savings: Staying an Uneven Course
"With the widespread concern about their long-term financial future, American workers still are not doing enough to plan and save for retirement security," Houston said. Consistent with past studies, more than one out of four workers (27%) have not even planned their retirement savings. Employees were also asked if they have a plan for how they will transition their retirement savings into a steady stream of income in retirement; the majority (71%) said they do not have a plan.
The majority of workers (53%) expect their standard of living to decline in retirement. This is particularly true for employees who are nearing retirement. Two-thirds (66%) of employees over the age of 55 say their standard of living in retirement will decline. That same group of older workers also expects to retire at the age of 67, which is higher than the average age at which all workers expect to retire (65), indicating older workers realize they may not be financially prepared to give up their jobs.
"This lack of savings is even more startling considering how pessimistic people are about their future standard of living," said Houston. "This definitely drives home the point about having to provide more education to employees on planning and saving for retirement at every life stage."
But planning alone, according to Houston, is not enough: "American workers also need more automatic, or so-called 'do-it-for-me' tools to overcome the inertia that goes with long-term savings." Automatic enrollment is in fact one potential remedy. Yet, the study revealed that employers have not yet fully embraced the practice of automatically enrolling eligible employees into their 401(k) plan. Only 16% of employees noted their employers doing this. However, the study did show interest amongst employees in automatic enrollment, with 36% supporting automatic enrollment and 36% opposing it. Meanwhile, nearly half of workers surveyed (47%) agreed that they would enroll in a program that automatically increases their 401(k) deferral rate an additional 1% each year.
American workers are increasingly interested in receiving help to manage their retirement investments. More than half (51%) of employees prefer to select their own investment funds. Additionally, those respondents who noted they prefer to have someone manage their investments were also asked if they prefer lifestyle funds handled by a fund manager or professionally managed accounts through a financial advisor making investment decisions on their behalf. The majority (52%) said that lifestyle funds were their preferred method, versus the 29% that said they'd prefer fee-based financial advisors.
Employee Benefit Satisfaction and Importance
Benefit offerings from U.S. employers have contributed to some relief in the workplace. Satisfaction ratings for employee benefits rose across the board, especially with defined contribution plans. The Principal found that 53% of American workers say they are satisfied with their defined contribution plans, up from 43% in first quarter 2004. Satisfaction with defined benefit plans also rose (53% from 46%). The Principal found satisfaction ratings for employer-provided life insurance, disability insurance and health insurance, also rose.
American workers said their benefits continue to be important to them, although slightly less in importance from earlier in the year. The top rated benefit in terms of importance was health care, with 89% of respondents saying it was very important (down from 92% in first quarter 2004). The next most important benefit was their defined contribution plan (68%) followed by defined benefit plans (54%).
"One important finding is that high-quality benefits do encourage employees to work harder and result in a more motivated workforce," Houston said. Almost 2 out of 3 employees (64%) agree that a good employee benefits plan keeps them working for their current company and encourages them to work harder and perform better.
Methodology: The Principal Financial Group, the nation's 401(k) leader, commissioned Harris Interactive® to conduct an online study of 1,227 employees (ages 18+) of small and mid-sized U.S. businesses (firm size 10 - 1,000) between Aug. 19 and Sept. 2, 2004, about their attitudes and perceptions regarding their financial well being. Data were weighted to be representative of the entire population of adult employees working for small to mid-sized U.S. businesses. Propensity score weighting was used to adjust for respondents' propensity to be online. In theory, with a probability sample of this size, one can say with 95% certainty that the results have a statistical precision of ± 3 percentage points for the overall sample. The statistical precision for the sample of those preferring to have someone manage their investments (359) is +/- 5 percentage points. This online sample 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 mid-sized (growing) businesses. The first Principal Financial Well-Being IndexSM survey was conducted in the United States in 2000. In 2002, The Principal also began to conduct a Global Financial Well Being Index.
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 $152.1 billion in assets under management2 and serves some 14.6 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 (www.harrisinteractive.com) is a global research firm that blends premier strategic consulting with innovative and efficient methods of investigation, analysis and application. Well known for The Harris Poll® and for pioneering Internet-based research methods, Rochester, New York-based Harris Interactive conducts proprietary and public research to help its clients around the world achieve clear, material and enduring results. Harris Interactive combines its intellectual capital, databases and technology to advance market leadership through its U.S. offices and wholly owned subsidiaries: London-based HI Europe (www.hieurope.com), Paris-based Novatris (www.novatris.com), Tokyo-based Harris Interactive Japan, recently acquired U.S.-based WirthlinWorldwide (www.wirthlinworldwide.com) and through a global network of affiliate firms.
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, 2004.
