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The Principal Financial Well-Being IndexSM Employee and Retiree Comparison Questions - Second Quarter 2006

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Employee Financial Well Being

In measuring employees' and retirees' attitudes and perceptions about their financial well-being, a series of different questions were asked of them. They were asked to identify how much they agreed with some statements relating to how concerned they are about their long-term financial future and how happy they are about their current well-being. As seen in table 1, employees (68%) are significantly more likely to be concerned about their long-term financial future than retirees (48%). However, a significantly smaller number of employees (68%) are concerned about their long-term financial future than last year at this time (74%). In 2006, a significantly higher percentage of female employees (75%) than male employees (62%) are concerned about their long-term financial future.

Almost half (45%) of the retirees are extremely happy about their current financial well-being compared to 30% of the employees. There are significant differences between responses from retirees and employees - indicated with "sig" below.

Table 1
"Please indicate the extent to which you agree or disagree with the following statements..."
Base: 1100 employed U.S. adults in firms of 10-1,000 employees and 638 retirees

(% of respondents agreeing completely or somewhat) 2 Qtr 2006 2 Qtr 2005 EE 2 Qtr 2004 EE 2 Qtr 2003 EE 2 Qtr 2002 EE 2 Qtr 2001 EE
Retiree EE
I am very concerned about my long-term financial future. 48%sig 68%SIG 74% 76% 73% 78% 84%
I am extremely happy about my current financial well-being. 45%sig 30% 29% 28% 28% 27% 24%
I have not yet planned for retirement savings/security. N/A 30% 29% 24% 26% 28% 27%

SIG - varies significantly (95% level) from previous results employee comparison
sig - varies significantly (95% level) from retiree and employee comparison

Financial Planning

Employees and retirees were asked a series of questions about financial planning. Table 2 shows who employees and retirees turn to for financial advice. 40% of the retirees responded they don't seek advice from others compared to only 13% of the employees. Approximately one-third of employees (35%) would go to family or friends compared to only 11% of the retirees.

Table 2
"To whom would you normally go first for financial advice?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees and 638 retirees

  2 Qtr 2006 2 Qtr 2002 EE
Retiree EE
Family or friends 11%sig 35%SIG 30%
Certified financial planner 16% 14% 12%
Bank or financial institution 9% 10% 12%
Accountant 5% 7% 7%
Internet 2%sig 10%SIG 7%
Benefit provider or financial services company 4% 5% 5%
Stock Broker 5%sig 2%SIG 4%
Insurance agent or broker 1% <1% 3%
Attorney 3%sig 1% 1%
Employer N/A 1% 1%
News Media (e.g. magazines, newspapers, radio, TV) 1% 2% N/A
Other 3% 3% 2%
Don't seek advice from other individuals 40%sig 13%SIG 17%
  N=638 N=1100 N=982

SIG - varies significantly (95% level) from comparison
sig - varies significantly (95% level) from retiree and employee comparison

Coffee Allowance

Employees and retirees were asked how much they spend per week on coffee. Among those who drink coffee, there were significant differences between the retirees and employees with the majority of retirees (68%) saying they spend less than $5 per week on coffee. We compared the employee responses of this question to results from 2003 when this question was last asked. There are significant differences with only one-third of employees saying the coffee is free, compared to 64% in 2003.

Table 3
"How much money do you estimate you spend every week on coffee?"
Base: 793 U.S. Working Adults age 18+ who drink coffee (of 1100 total worker respondents 307 don't drink coffee); N= 523 retirees who drink coffee (of 638 total retiree respondents, 115 don't drink coffee)

2 Qtr 2006 2 Qtr 2003 EE
Retiree EE
$0-it's free 12%sig 33%SIG 64%
Less than $5 per week 68%sig 40%SIG 21%
$5-$9.99 per week 18% 19%SIG 9%
$10.00-$14.99 per week 2%sig 4% 3%
$15.00 or more 1%sig 4%SIG 2%
N=523 coffee drinkers N=793 coffee drinkers N=826 coffee drinkers

SIG - varies significantly (95% level) from previous results employee comparison
sig - varies significantly (95% level) from retiree and employee comparison

Second or Vacation Homes

A series of questions were asked of employees and retirees about whether or not they own or want to own a second home. The results are shown in tables 4-8. Approximately seven out of ten employees (68%) own a primary residence, which has remained relatively constant since the last time this question was asked in 2003. As expected, a larger portion of retirees (80%) own their primary residence.

Employees and retirees who own their primary residence were asked if they owned a second or vacation home. As shown in table 5, a significantly larger portion of retirees (16%) responded they did than employees (10%). Employee results showed no statistically significant differences since 2003.

Table 4
"Do you own your primary residence?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees and 638 retirees

  2 Qtr 2006 2 Qtr 2003 EE
Retiree EE
Yes 80%sig 68% 70%
No 20%sig 32% 30%
  N=638 N=1100 N=1216

sig - varies significantly (95% level) from retiree and employee comparison

Table 5
"Do you own a second or vacation home?"
Base: N= 737 employed U.S. in firms of 10-1,000 employees and 539 retirees who own their primary residence

  2 Qtr 2006 2 Qtr 2003 EE
Retiree EE
Yes 16%sig 10% 9%
No 84%sig 90% 91%
  N=539 N=737 N=852

sig - varies significantly (95% level) from retiree and employee comparison

Retirees and employees owning their primary residence but not a second home were asked how likely they would be to own a second home sometime in the future. Significantly more retirees (77%) than employees (41%) responded it is "Very Unlikely". The 41% of employees responding it is "Very Unlikely" is also significantly greater than in 2003 when only 32% of the employees responded it was "Very Unlikely".

Table 6
"How likely would you be to own a second or vacation home sometime in the future?"
Base: 665 employed U.S. adults in firms of 10-1,000 employees and 452 retirees who own their primary residence and don't own a second home

  2 Qtr 2006 2 Qtr 2003 EE
Retiree EE
Very Likely 2%sig 5%SIG 9%
Somewhat Likely 6%sig 17% 21%
Neither Likely nor Unlikely 5%sig 17% 14%
Somehwat Unlikely 10%sig 21% 24%
Very Unlikely 77%sig 41%SIG 32%
  N=452 N=665 N=776

SIG - varies significantly (95% level) from previous results employee comparison
sig - varies significantly (95% level) from retiree and employee comparison

There has been a significant increase from 2003, in the percentage of employees who feel the primary motivation for owning/wanting a second home is for an investment. There has been a corresponding decline in the percentage of employees who want a second home for personal enjoyment. Retirees are significantly less likely to say they own/want a second home for investment purposes.

Table 7
"What is your primary motivation for owning or wanting to own a vacation/second home?"
Base: 207 employed U.S. adults in firms of 10-1,000 employees and 132 retirees who own their primary residence and own a second home or are likely to own a second home

  2 Qtr 2006 2 Qtr 2003 EE
Retiree EE
Personal enjoyment 56% 50%SIG 68%
Future permanent home 5% 9%SIG 16%
Investment 25%sig 35%SIG 14%
Other 14%sig 5% 3%
  N=132 N=207 N=309

SIG - varies significantly (95% level) from previous results employee comparison
sig - varies significantly (95% level) from retiree and employee comparison

Retirees are significantly more likely to finance a second home with cash payment/savings than employees who are most likely to take out a traditional first mortgage. When comparing employee results with 2003, employees today are much more likely to take out a home equity loan than they were in 2003.

Table 8
"If you were to purchase (or have purchased) a vacation/second home, how did or how do you intend to finance it?"
Base: 207 employed U.S. adults in firms of 10-1,000 employees and 132 retirees who own their primary residence and own a second home or are likely to own a second home

  2 Qtr 2006 2 Qtr 2003 EE
Retiree EE
Traditional 1st mortgage loan 28%sig 54% 53%
Cash payment/savings 57%sig 26% 27%
Home Equity Loan 7%sig 23%SIG 16%
Loan from friends, family or other source 3% 3% 3%
401(k) or similar loan from my personal investments 2% 2% 2%
Not sure 9% 8%SIG 14%
  N=132 N=207 N=309

SIG - varies significantly (95% level) from previous results employee comparison
sig - varies significantly (95% level) from retiree and employee comparison

Financial Analysis of Coverage

Almost three out of four (73%) retirees and employees responded they have not had a financial analysis of any of several financial planning areas listed. Both retirees and employees most often listed retirement savings, as the item that has been reviewed for adequacy within the past three years.

Table 9
"In the past 3 years, have you had anyone conduct financial analysis to determine the adequacy of your coverage in any of the following areas? Please check all that apply."
Base: 1100 employed U.S. adults in firms of 10-1,000 employees and 638 retirees

  2 Qtr 2006 2 Qtr 2003 EE
Retiree EE
Retirement Savings 20% 19% 21%
Life Insurance (survivor benefits) 13% 13%SIG 19%
Savings Goals 8%sig 12% 14%
Estate Planning 13%sig 5%SIG 9%
Disability Income Protection 6% 5%SIG 8%
Education Funding 2%sig 5% 6%
None of these 73% 73%SIG 69%
  N=638 N=1100 N=1216

SIG - varies significantly (95% level) from previous results employee comparison
sig - varies significantly (95% level) from retiree and employee comparison

Retirement Age

Employees were asked at what age do you expect to retire, and retirees were asked at what age they did retire (at least from their previous career if they are still working part-time). Fifteen percent of the employees responded that they don't plan to ever retire. Half of the retirees responded that they retired at age 60 or younger. Only 27% of the employees think they will retiree at age 60 or younger.

Table 11 shows the employee responses broken out by age groupings. The results are surprisingly similar among the age groups with the only statistically significant difference being the small percentage (12%) of employees 55 and older who feel they will retire at age 60 or younger.

Table 10
"Realistically, at what age do you expect to retire?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees
"At what age did you retire from your previous career?"
Base: 638 retirees

  2 Qtr 2006 2 Qtr 2003 EE
Retiree EE
Age 60 or younger 50%sig 27% 24%
Age 61-65 37%sig 29%SIG 33%
Age 66-70 9%sig 24% 27%
Age 71 or older 3% 5% 5%
Don't plan on retiring N/A 15%SIG 12%
  N=638 N=1100 N=1307

SIG - varies significantly (95% level) from previous results employee comparison
sig - varies significantly (95% level) from retiree and employee comparison

Table 11
"Realistically, at what age do you expect to retire?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees

  2nd Qtr 2006 Employee Current Age
18-34 35-44 45-54 55+
Age 60 or younger 33% 28% 27% 12%SIG
Age 61-65 28% 24% 34% 32%
Age 66-70 21% 27% 22% 30%
Age 71 or older 5% 4% 2% 8%
Don't plan on retiring 14% 17% 15% 18%
  N=356 N=309 N=277 N=158

Standard of Living in Retirement

Employees were asked how they feel their standard of living now will compare with their retirement. This same question was also asked in 2004. When compared to employees responses in 2004, employees in 2006 seem a bit more optimistic about their standard of living in retirement with significantly more feeling their standard of living will be a little better and significantly fewer saying it will be a little worse. Female employees in 2006 are less optimistic than the male employees. 18% of the female employees feel it will be a lot worse compared to only 8% of the male employees.

Retirees were asked how their standard of living compares to when they were working in their primary career. More than 1 in four (28%) responded it is a little or a lot better. One-third feel it is about the same. Almost two out of five (39%) feel it is a little or a lot worse. significantly more male retirees (36%) than female retirees (22%) responded that it is a little or a lot better. Conversely, significantly more female retirees (48%) responded it is a little to a lot worse than male retirees (27%).

Table 12
"Do you think your standard of living in retirement will be better than it is now, worse than it is now or about the same as it is now?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees
"How does your standard of living now compare to when you were working in your primary career?"
Base: 638 retirees

  2 Qtr 2006 2 Qtr 2003 EE
Retiree EE
A lot better 11%sig 6% 5%
A little better 17% 14%SIG 8%
About the same 33% 35% 34%
A little worse 25% 29%SIG 34%
A lot worse 14% 13% 15%
Not sure <1%sig 4% 4%
  N=638 N=1100 N=1307

SIG - varies significantly (95% level) from previous results employee comparison
sig - varies significantly (95% level) from retiree and employee comparison

State of Retirement

Retirees and employees were asked a series of questions about things related to retirement. Not surprisingly, retirees were more significantly more confident than the employee group. One question asked about confidence in having enough money to take care of basic expenses during retirement. Three out of four (76%) retirees were confident or somewhat confident but that leaves approximately one-fourth of retirees not sure they will have enough money to take care of basic expenses.

Employees in 2006 seem more confident overall than in 2004 when these questions were last asked. As shown in Table 13, three of the four questions have seen statistically significant increases in confidence.

Table 13
"Next we would like to know how confident you (and your spouse/significant other) are about certain things related to your retirement. How confident are you that…"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees and 638 retirees

(% of respondents very confident or somewhat confident) 2 Qtr 2006 2 Qtr 2003 EE
Retiree EE
You will have enough money to take care of your basic expenses during your retirement. 76%sig 70% 69%
You will have a retirement that is at least as affluent as your parents. 72%sig 61%SIG 56%
You will not have to worry about financial matters during retirement. 66%sig 48%SIG 40%
You will be able to maintain your pre-retirement standard of living during retirement. 66%sig 55%SIG 46%
  N=638 N=1100 N=1307

SIG - varies significantly (95% level) from previous results employee comparison
sig - varies significantly (95% level) from retiree and employee comparison

  • Significantly more male employees are confident they will have enough money to take care of basic expenses than female employees (74% versus 64%), have a retirement at least as affluent as their parents (65% versus 55%) and will not have to worry about financial matters during retirement (54% versus 42%).
  • Retiree gender results mirrored the employee results with significantly more male retirees being confident they will have enough money to take care of basic expenses than female retirees (83% versus 69%), have a retirement at least as affluent as their parents (80% versus 66%) and will not have to worry about financial matters during retirement (75% versus 58%).

Employees and retirees were asked what they would do if they were retired and realized they didn't have enough savings to pay for basic necessities. The most frequently given response by either group was to go back to work. 90% of the employees said they would go back to work but only 47% of the retirees responded they would go back to work. Getting a reverse mortgage was mentioned by significantly more retirees (28%) than employees (18%).

Table 14
"What might you do as a retiree if you realized you did not have enough savings to pay for the basic necessities? Please select all that apply"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees and 638 retirees

  2 Qtr 2006
Retiree EE
Go back to work 47%sig 90%
Get a reverse mortgage 28%sig 18%
Rely on my children, family and friends to make ends meet 9% 11%
Declare bankruptcy 6%sig 9%
Other 30%sig 11%

sig - varies significantly (95% level) from retiree and employee comparison

Net Income Allocation

Respondents have said that they are concerned about their long-term financial future. We asked employees and retirees to tell us roughly how they allocate their net income/take home after taxes dollars. We provided three broad categories for them to use for allocation purposes:

  • ESSENTIAL EXPENSES- (mortgage/rent, auto/transportation, utilities, dependant care, alimony, etc.)
  • DISCRETIONARY EXPENSES- (Luxury/non-essential items, entertainment, vacations, club memberships, etc.)
  • SAVINGS- (401(k), IRA, investment accounts, bank savings accounts, other savings)

Table 15 shows employees and retirees feel the majority of their take home pay is going to essential expenses, followed by discretionary expenses and then, savings. Employees were asked this same question in 2005 and there have been no significant changes in how employees allocate their net income. However, in 2006, male retirees indicate a significantly higher percentage of their take home pay (23.6%) goes to discretionary expenses than female retirees who report 16.2% goes to discretionary expenses. Female retirees indicate a higher percentage of take home pay goes to essential expenses (68.4%) than male retirees (59.6%).

Table 15
"Thinking only about YOUR PERSONAL net income/take home income after taxes, please indicate how you currently allocate your net income into the three broad categories listed below."
Base: 1100 employed U.S. adults in firms of 10-1,000 employees and 638 retirees

Summary table of Means 2 Qtr 2006 2 Qtr 2003 EE
Retiree EE
Essential Expenses 64.5 63.7 64.5%
Discretionary Expenses 19.5 19.5 18.6%
Savings 16.0 16.9 16.9%
  N=638 N=1100 N=1112

Pre-retirement Income

Employees and retirees were asked how much of their pre-retirement income will most likely be needed to maintain their current lifestyle as a retiree. There are significant differences in the employee and retiree responses as shown in Table 16. Additionally, significantly more female employees (26%) than male employees (15%) feel you will need 90% or more of your pre-retirement income.

Table 16
"How much of your pre-retirement income will you most likely need as a retiree to maintain your current lifestyle?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees and 638 retirees

  2 Qtr 2006
Retiree EE
Less than 50% 21%sig 7%
50%-64% 21% 18%
65%-79% 16%sig 32%
80%-89% 15%sig 24%
90% or more 27%sig 20%

sig - varies significantly (95% level) from retiree and employee comparison

Rising Fuel Costs

Employees and retirees were asked if the rising cost of fuel had influenced various activities in their lives. As illustrated in table 17, there are significant differences in how it is impacting retirees and employees. Significantly more employees than retirees say it has impacted holiday vacation plans, automobile purchasing decisions, the grade of fuel used and the decision to carpool or use alternate means of transportation. One third of the retirees responded that it has made no impact.

Table 17
"Has the rising cost of fuel influenced any of the following in your life? Please select all that apply."
Base: 1100 employed U.S. adults in firms of 10-1,000 employees and 638 retirees

  2 Qtr 2006 2 Qtr 2003 EE
Retiree EE
Holiday vacation plans 34%sig 40% 41%
Automobile purchasing decisions 31%sig 38%SIG 32%
Grade of fuel used 11%sig 18% 19%
The decision to carpool or use alternate means of transportation on a given day 7%sig 16% 17%
Other 30%sig 21%SIG 14%
The rising cost of fuel has made no impact on my lifestyle 33%sig 27% 29%
  N=638 N=1100 N=1147

SIG - varies significantly (95% level) from previous results employee comparison
sig - varies significantly (95% level) from retiree and employee comparison

Retirement Investments

Employees and retirees were asked where they have money invested for their retirement. There were statistically significant differences between retirees and employees for every option asked about on the survey. Retirees were more likely than employees to have money in all the options listed with the exception of the 401(k)/403(b) plan.

Table 18
"In which of the following do you have money invested in for your retirement? Please select all that apply"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees and 638 retirees

  2 Qtr 2006
Retiree EE
Checking account/savings account 56%sig 42%
IRA's 39%sig 26%
Mutual Funds 33%sig 26%
Defined benefit (pension) plan 28%sig 16%
401(k) or 403(b) plan 19%sig 63%
Annuity 25%sig 6%
CD's 28%sig 13%
Savings Bonds 13%sig 8%
Stocks 34%sig 26%
Bonds 15%sig 8%
None of these 18%sig 13%

sig - varies significantly (95% level) from retiree and employee comparison

Years in Retirement

Retirees plan to spend significantly more years in retirement (26.2 average) than employees (21.1 average). There are no statistically significant differences among age groups when looking at employee responses as seen in Table 20.

Table 19
"How many total years do you plan to spend in retirement?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees and 638 retirees

  2 Qtr 2006
Retiree EE
0-10 years 10%sig 23%
11-20 years 31%sig 39%
21-30 years 36%sig 26%
31-40 years 16%sig 7%
41-50 years 5%sig 2%
51 or more years 2% 2%
Average Years in Retirement 26.sig 21.1

sig - varies significantly (95% level) from retiree and employee comparison

Table 20
"How many total years do you plan to spend in retirement?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees

  2nd Qtr 2006 Employee Current Age
18-34 35-44 45-54 55+
0-10 years 21% 23% 21% 31%
11-20 years 36% 45% 40% 37%
21-30 years 28% 22% 27% 24%
31-40 years 9% 7% 6% 3%
41-50 years 3% 1% 3% 1%
51 or more years 2% 1% 3% 4%
Average Years in Retirement 22.4 19.8 21.3 19.8
  N=356 N=309 N=277 N=158

Retirement Spending

Retirees and employees were told to assume they had $100,000 in savings and asked how much they could spend from that each year in retirement and be confident they would not run out of money. The largest portion of retirees (41%) and employees (34%) responded with the lowest response of $4,000. Significantly more retirees gave the $4,000 response than employees.

Table 21
"If you had $100,000 in savings, how much could you spend from that each year in retirement and be confident that you would not run out of money?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees and 638 retirees

  2 Qtr 2006
Retiree EE
$4,000 41%sig 34%
$6,000 25% 22%
$8,000 13% 16%
$10,000 12%sig 20%
Over $10,000 10% 9%

sig - varies significantly (95% level) from retiree and employee comparison

Guaranteed Income in Retirement

Employees were asked what portion of their retirement nest egg they would put in a guaranteed investment that provides a guaranteed amount of retirement income every month for your lifetime. Retirees were asked what portion of their retirement nest egg they have in guaranteed investments that provide a guaranteed monthly income every month for their lifetime. As Table 22 shows, the results were significantly different with 42% of the retirees saying 0% of their nest egg.

Table 22
"What portion of your retirement nest egg would you put in a guaranteed investment that provides a guaranteed amount of retirement income every month for your lifetime?"
Base: N= 1100 employed U.S. adults in firms of 10-1,000 employees
"What portion of your retirement nest egg do you have in guaranteed investments that provide a guaranteed amount of retirement income every month for your lifetime?"
N= 638 retirees

  2 Qtr 2006
Retiree EE
0% 42%sig 6%
1%-24% 16% 16%
25%-49% 13%sig 33%
50%-74% 15%sig 32%
75%-99% 7% 9%
100% 7% 5%

sig - varies significantly (95% level) from retiree and employee comparison

Check-Ups

Employees and retirees were given a list of items that people have periodic check-ups. Almost half (47%) of the employees and 44% of the retirees say they have never had a financial planning check-up. On the other hand, over half of the employees (54%) and 39% of the retirees have their car checked four times per year or more.

Table 23
"Approximately how often each year do you do each of the following check-ups?"
Base: 1100 employed U.S. adults in firms of 10-1,000 employees and 638 retirees

Type of check-up 2 Qtr 2006
4 times or more 3 times 2 times 1 time Less than 1 time Never
Retiree EE Retiree EE Retiree EE Retiree EE Retiree EE Retiree EE
Car Check-up 39%sig 54% 19%sig 24% 19%sig 13% 10%sig 4% 3% 2% 9%sig 4%
Financial Planning Check-up 10%sig 4% 2% 2% 9%sig 5% 15% 17% 19%sig 26% 44% 47%
Dental Health Check-up 6%sig 3% 6% 5% 28%sig 41% 22%sig 18% 20%sig 27% 17%sig 8%
Heater/Air conditioner Check-up 1% 1% 1% 1% 14%sig 9% 39%sig 30% 26%sig 32% 19%sig 26%
Medical Check-up 29%sig 10% 9%sig 6% 19%sig 14% 31%sig 39% 10%sig 26% 2%sig 6%
Vision Check-up 2% <1% 2% 1% 15%sig 4% 47% 45% 32%sig 41% 2%sig 8%

sig - varies significantly (95% level) from retiree and employee comparison

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