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

Financial Well Being

In measuring employees' and retirees' attitudes and perceptions about their financial well-being, a series of different questions were asked. Employees and retirees 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 (77%).

Half (50%) of the retirees are extremely happy about their current financial well-being compared to (28%) of the employees. There are significant differences between responses from retirees and employees - indicated with "sig" below. When comparing employee results with last year at this time, significantly more employees are extremely happy about their current financial well-being than they were last year-indicated with "SIG" below.

Table 1
"Please indicate the extent to which you agree or disagree with the following statements..."
Base: 1360 employed U.S. adults in firms of 10-1,000 employees and 721 retirees

Agree/Disagree
(% of respondents agreeing completely or somewhat)
3 Qtr 2006 3 Qtr 2005 EE 3 Qtr 2004 EE
Retiree EE
I am very concerned about my long-term financial future. 48%sig 68%SIG 77% 78%
I am extremely happy about my current financial well-being. 50%sig 28%SIG 22% 26%
I have not yet planned for retirement savings/security. N/A 27%SIG 33% 27%

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

Financial Planning Assistance

Employees and retirees were asked to name the best lesson learned from receiving financial planning advice. Half of the employees and significantly more retirees (57%) said they have not received any financial planning. The most frequently mentioned best lesson by both retirees (19%) and employees (20%) was to "diversify my portfolio".

Table 2
"What is the best lesson you have learned from receiving financial planning assistance?"
Base: 1360 employed U.S. adults in firms of 10-1,000 employees and 721 retirees

Lesson Learned from financial planning assistance 3 Qtr 2006
Retiree EE
Diversify my portfolio 19% 20%
Invest maximum in 401(k)/403(b) plan, IRA or
non-qualified plan
10%sig 16%
Increase deferral into 401(k)/403(b) plan 1%sig 8%
Become more conservative with investment strategy 7%sig 3%
Make company stock a smaller portion of my retirement savings <1%sig 2%
Other 4% 3%
I have not received any financial planning assistance. 57%sig 50%
  N=721 N=1360

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

Financial Planning Regrets

Respondents were asked what financial planning regrets they had, if any. Almost two out of five (39%) retirees didn't have any financial planning regrets. Approximately one-fourth (27%) of employees didn't have any financial planning regrets. The regret cited most often by retirees and employees was that they started saving too late.

Table 3
"What regrets do you have, if any, regarding your financial planning?"
Base: 1360 employed U.S. adults in firms of 10-1,000 employees and 721 retirees

Regrets about financial planning 3 Qtr 2006
Retiree EE
Started saving too late 32%sig 45%
Deferred too little in early working years 22% 27%
Thought I could manage it on my own 10% 9%
Did not defer bonus or salary into a retirement account 8% 8%
Made poor choices regarding mutual fund options 8% 7%
Other 8% 8%
Don't have any regrets 39%sig 27%
  N=721 N=1360

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

Transition Plan for Retirement

Thirty percent of employees have a plan for how to transition their retirement savings into a steady stream of income in retirement. That number has not changed significantly since 2004 when the question was last asked. Half of retirees (51%) said they have a plan for transitioning retirement savings into a steady income stream in retirement.

Table 4
"Do you have a plan for how to transition your retirement savings into a steady stream of income in retirement?"
Base: 1360 employed U.S. adults in firms of 10-1,000 employees

"Did you have a plan for how to transition your retirement savings into a steady stream of income in retirement?"
Base: 721 retirees

Have/had a plan 3 Qtr 2006 3 Qtr 2004 3 Qtr 2006
EE by age
Retiree EE EE 18-34 35-44 45-54 55+
Yes 51%sig 30% 32% 19% 28% 29% 48%
No 49%sig 70% 68% 81% 72% 71% 52%
  N=721 N=1360 N=1015 N=223 N=345 N=407 N=385

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

  • Significantly more employees age 55+ have a plan for how to transition their retirement savings into a steady stream of income in retirement than the younger age groups.
  • Also, significantly more male employees (35%) have a transition plan than female employees (24%).

Retirement Issues

Employees were given a list of issues and asked to identify which ones keep them awake at night. The issue mentioned most often by employees (43%) is being able to afford good medical care. The issue cited most often by retirees (37%) is the rising cost of inflation reducing purchasing power. Female employees are significantly more concerned about being able to afford/pay for the basic necessities than males. There were very few significant differences based upon age. See details in Table 5.

Table 6 shows the results when asked to identify which ONE issue they are most concerned about in thinking ahead to their financial well-being. When having to select only one issue, the one chosen most often by retirees is being able to afford good medical care. The issue of most concern to employees is being able to enjoy the same quality of live that I live now.

Table 5
"In thinking ahead to your financial well-being in retirement, which of the following keeps you awake at night?"
Base: 1360 employed U.S. adults in firms of 10-1,000 employees and 721 retirees

Things to worry about 3 Qtr 2006 3 Qtr 2005 2006 Gender
Retiree EE Male
EE
Female
EE
Being able to afford good medical care 26%sig 43%SIG 49% 40% 46%
Being able to enjoy the same quality of life that I live now/lived before I retired 20%sig 42%SIG 47% 43% 41%
Being able to afford/pay for the basic necessities 22% 38%SIG 46% 32% 45%SIG*
Outliving my savings 23%sig 33% 34% 32% 33%
Rising cost of inflation reducing purchasing power 37% 33% N/A 35% 31%
Being able to afford vacations/visiting grandkids 14%sig 22%SIG 27% 22% 22%
Being able to pay for assisted living/long term care 24% 22% 24% 20% 25%
Invested too conservatively and earnings haven't kept up with inflation 7%sig 13% N/A 15% 12%
None of these 35%sig 27%SIG 20% 28% 25%

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

Table 6
"In thinking ahead to your financial well-being in retirement, which is the one issue that you are most concerned about?"
Base: N= 986 employed U.S. Adults and 387 retirees (based on respondents who have an issue keeping them awake at night)

Issue most concerned about 3 Qtr 2006 3 Qtr 2005 2006 Gender
Retiree EE Male EE Female EE
Being able to enjoy the same quality of life that I live now/lived before I retired 13%sig 29% 25% 32% 25%
Being able to afford/pay for the basic necessities 19%sig 28% 32% 22% 35%SIG*
Being able to afford good medical care 27% 21% 22% 22% 19%
Outliving my savings 17% 14%SIG 11% 15% 13%
Being able to afford vacations/visiting grandkids 7% 4%SIG 6% 5% 3%
Being able to pay for assisted living/long term care 17%sig 4% 5% 4% 4%

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

Money in 401(k)/403(b) plan with Previous Employer

Almost half of the employees (45%) almost a third (30%) of the retirees said they had left an employer where they had money in a 401(k)/403(b) plan. A follow up question was asked to see what was done with the money that was in the previous employer's plan. The results are shown in table 8. Employees (40%) were most likely to cash out the account and take the money. The majority of retirees (60%) said they rolled it over into a personal IRA account.

Table 7
"Have you ever left an employer where you had money in a 401(k)/403(b) plan?"
Base: 1360 employed U.S. adults in firms of 10-1,000 employees and 721 retirees

Left employer with a 401(k)/403(b) Plan

3 Qtr 2006

Retiree

EE

Yes 30%sig 45%
No 70%sig 55%
  N=721 N=1360

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

Table 8
"What did you do with the money you had in the previous employer's plan?"
Base: 609 employed U.S. adults in firms of 10-1,000 employees and 261 retirees who have left an employer where they had money in the 401(k)/403(b) account

Money from previous employer's plan 3 Qtr 2006
Retiree EE
Cashed out the account and took the money 16%sig 40%
Rolled it over into a personal IRA account 60%sig 30%
Left the money in the account in the previous employer's plan 14% 17%
Consolidated into account in the new employer's retirement plan 6% 12%
Other 3%sig <1%
  N=261 N=609

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

High Deductible Health Plans

To understand the level of knowledge regarding High Deductible Health Plans and Health Savings Accounts (HSA), employees and retirees were given a description of a High Deductible Health Plan and also a Health Savings Account (HSA). They were asked, "Prior to this survey, had you ever heard of a Health Savings Account?" The percentage of employees who say they have heard of an HSA has increased significantly since the last time this question was asked. Male employees (69%) were significantly more likely than female employees (54%) to have heard of the HSA.

Table 9
"Prior to this survey, had you ever heard of a Health Savings Account?"
Base: 1360 employed U.S. adults in firms of 10-1,000 employees and 721 retirees

Heard of a Health Savings Account 3 Qtr 2006 2 Qtr 2005 EE
Retiree EE
Yes 45%sig 62%SIG 48%
No 55%sig 38%SIG 52%
  N=721 N=1360 N=1112

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

Windfall of Money

Employees and retirees were asked how they would spend a sudden windfall of money. Table 10 shows that three-fourths of employees said they would pay off debt compared to only 38% of the retirees. Significantly more female employees than male employees said they would pay off debt (80% vs. 71%) and share with friends and family (43% vs. 30%). Male employees (45%) were significantly more likely than female employees (37%) to say they would invest in mutual funds, IRA, Annuity or the stock market.

Both employees and retirees (58% and 55%) said they would work with a financial advisor to figure out the best way to use it. Retirees (46%) were significantly more likely to share it with friends and family than employees (36%).

Table 10
"How would you spend a sudden windfall of money such as an inheritance, lottery or early retirement/employment buy-out package? Please check all that apply."
Base: 1360 employed U.S. adults in firms of 10-1,000 employees and 721 retirees

How to spend sudden windfall of money 3 Qtr 2006
Retiree EE
Pay off debt 38%sig 75%
Work with a financial advisor to figure out the best way to use it 55% 58%
Invest in mutual funds, IRA, annuity or the stock market 30%sig 41%
Share with friends and family 46%sig 36%
Take an exclusive vacation 15%sig 25%
Spend money on luxury items such as jewelry, car or home 10%sig 21%
Other 14% 11%
  N=721 N=1360

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

When asked to identify what they would do first with the money, the majority of employees (57%) said they would pay off debt, whereas retirees (38%) were most likely to say they would work with a financial advisor to figure out the best way to use the money. Table 11 shows the details.

Table 11
"If you did receive a sudden windfall of money, what would you do first with the money?"
Base: 1360 employed U.S. adults in firms of 10-1,000 employees and 721 retirees

First thing to do with windfall money 3 Qtr 2006

Retiree

EE

Pay off debt 24%sig 57%
Work with a financial advisor to figure out the best way to use it 38%sig 26%
Invest in mutual funds, IRA, annuity or the stock market 10%sig 6%
Share with friends and family 16%sig 4%
Spend money on luxury items such as jewelry, car or home 2% 2%
Take an exclusive vacation 2% 1%
Other 8%sig 4%
  N=721 N=1360

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

Rising Fuel Costs

Respondents were asked if the rising cost of fuel had influenced various activities in their lives. Over one-third (37%) of employees say it has had an impact on their holiday/vacation plans and almost one-third (31%) say the amount of money put into savings has been reduced. The greatest impact for retirees has been on holiday/ vacation plans with one-fourth (26%) saying it had an impact. Forty-two percent of retirees say the rising cost of fuel has had no impact on their lifestyle. See Table 12 for additional details.

Table 12
"Has the rising cost of fuel influenced any of the following in your life? Please select all that apply."
Base: 1360 employed U.S. adults in firms of 10-1,000 employees and 721 retirees

Rising fuels costs influenced 3 Qtr 2006 3 Qtr 2005
EE
Retiree EE
Holiday/vacation plans 26%sig 37%SIG 41%
Amount of money put into savings has been reduced. 15%sig 31% N/A
Luxury purchases have been delayed 15%sig 24% N/A
Purchase of a more fuel-efficient vehicle 9%sig 15% N/A
Grade of fuel used 6%sig 11%SIG 19%
The decision to carpool or use alternate means of transportation on a given day 4%sig 10%SIG 17%
Changed or considered changing jobs to shorten the commute to work. 1%sig 10% N/A
Other 21%sig 13% 14%
The rising cost of fuel has made no impact on my lifestyle 42%sig 28% 29%
  N=721 N=1360 N=1147

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 significantly more confident than the employee group. One question asked about confidence in having enough money to take care of basic expenses during retirement. Almost four out of five (79%) retirees were confident or somewhat confident they will have enough money to take care of basic expenses during retirement. Employee confidence is significantly less than retirees overall and it has declined significantly for each question in Table 13 since second quarter 2006.

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: 1360 employed U.S. adults in firms of 10-1,000 employees and 721 retirees

How confident are you that...
(% of respondents very confident or somewhat confident)
3 Qtr 2006 2 Qtr 2006
Retiree EE Retiree EE

You will have enough money to take care of your basic expenses during your retirement.

79%sig 62%SIG 76% 70%

You will have a retirement that is at least as affluent as your parents.

76%sig 56%SIG 72% 61%

You will not have to worry about financial matters during retirement.

64%sig 40%SIG 66% 48%

You will be able to maintain your pre-retirement standard of living during retirement.

65%sig 45%SIG 66% 55%

N=721 N=1360 N=638 N=1100

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 (71% versus 53%), have a retirement at least as affluent as their parents (63% versus 49%) and will not have to worry about financial matters during retirement (46% versus 33%). Males are also more confident than females that they will be able to maintain the pre-retirement standard of living (52% versus 38%).
  • 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 (89% versus 71%), have a retirement at least as affluent as their parents (84% versus 70%) and will not have to worry about financial matters during retirement (73% versus 58%). Males are also more confident than females that they will be able to maintain the pre-retirement standard of living (71% vs. 60%).

Financial Advisor

Almost three out of five (57%) of employees and retirees said they have no advisor helping them with retirement savings programs.

Table 14
"Which type of advisor do you have helping you with your retirement savings programs? Please select all that apply."
Base: 1360 employed U.S. adults in firms of 10-1,000 employees and 721 retirees

Type of Advisor 3 Qtr 2006
Retiree EE
Employee Benefit Broker 3%sig 18%
CPA 7% 6%
Insurance Agent 5% 5%
Bank Representative 10%sig 5%
Pension Broker 4% 4%
Attorney 4%sig 1%
Other 26%sig 13%
None 57% 57%
  N=721 N=1360

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

Personal Financial Planning

While many benefits are offered through the work place, there are also many things an employee can do on their own for personal financial planning. We asked respondents to both rate and rank the importance of various personal financial planning concepts. Retirement planning rated highest (top 3 box - that is, 8, 9, 10 on a 1-10 scale) and ranked number one most often among employees and retirees.

Table 15 - Importance of Personal Financial Planning Rating
"We would also like your opinions on the importance of a number of PERSONAL financial planning concepts that you may have considered for you and your family. Please rate the importance of each personal financial planning concept using a scale from 1 to 10 where "1" means Not at all important and "10" means Extremely Important?"
Base: 1360 employed U.S. adults in firms of 10-1,000 employees and 721 retirees

Percentages included in chart represent those rating importance as an 8, 9 or 10

Importance of personal financial planning concepts 3 Qtr 2006
Retiree EE
Retirement Planning 59%sig 71%
Life Insurance 33%sig 51%
Home, Auto, and Property Insurance 53% 48%
Investing 42% 43%
Disability Insurance 23%sig 40%
Long-Term Care Insurance 38% 32%
Estate Planning 41%sig 29%
Education Funding 18%sig 26%
Charitable Giving 20% 16%
  N=721 N=1360

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

Use of Personal Financial Planning Concepts

Over one third of the employees and retirees say they personally have used Home, Auto and Property Insurance, Investing, and Charitable Giving in the last 12 months.

We then asked the respondents who hadn't used a financial planning concept in the last 12 months what the likelihood would be of implementing each one in the next 12 months. Retirement Planning (33%) and Home, Auto and Property Insurance (30%) topped the list of things employees would be most likely to implement in the next 12 months. Retirees top two they would most likely implement in the next 12 months were Estate Planning (17%) and Long Term Care Insurance (15%).

Table 16 - Importance of Personal Financial Planning Ranking and Use
"Please rank the following financial concepts in order of importance from 1-9, based on your PERSONAL priorities?" We also asked "Have you personally used any of these products or plans in the last 12 months?"
Base: 1360 employed U.S. adults in firms of 10-1,000 employees and 721 retirees

Financial planning personal priorities/used in last 12 months Ranked #1 Mean Personally Use
Retiree EE Retiree EE Retiree EE
Retirement Planning 33%sig 46% 3.2 2.7 25% 30%
Home, Auto, and Property Insurance 11% 14% 4.2 4.2 63%sig 50%
Investing 12%sig 8% 4.8 5.0 41% 36%
Estate Planning 16%sig 7% 4.4 5.7 13%sig 5%
Life Insurance 7% 8% 5.0 4.2 19% 23%
Charitable Giving 5% 6% 6.2 6.6 46%sig 35%
Education Funding 4% 5% 6.6 6.2 5%sig 10%
Long-Term Care Insurance 7%sig 3% 5.1 5.5 13%sig 6%
Disability Insurance 4% 3% 5.6 4.9 4%sig 11%

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

Table 17 - Personally Implementing Products
"What is the likelihood of you PERSONALLY IMPLEMENTING one of these products or plans in the next 12 months?"
Base: respondents who have not used the product in the last 12 months

Percentages included in chart represent those rating very likely or likely

Personally Implementing financial planning in 12 months
Very Likely or Likely
3 Qtr 2006
Retiree EE
Retirement Planning 11%sig 33%
Home, Auto and Property Insurance 12%sig 30%
Investing 11%sig 26%
Disability Insurance 8%sig 19%
Life Insurance 6%sig 17%
Estate Planning 17% 17%
Education Funding 6%sig 16%
Charitable Giving 11% 15%
Long-Term Care Insurance 15% 15%

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

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