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The Principal Financial Well-Being IndexSM Employee and Retiree Comparison Questions - First Quarter 2007

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Financial Well Being

In measuring attitudes and perceptions about financial well-being, a series of different questions were asked. First 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. Significantly fewer employees say they have not yet planned for retirement savings/security than in 1st quarter 2006. According to Table 1, 73% of employees agree somewhat or completely that they are very concerned about their long-term financial future, while 29% of employees somewhat or completely agree that they are extremely happy with their current financial well-being.

Significantly fewer retirees (53%) than employees (73%) are very concerned about their long-term financial future, and significantly more retirees (44%) than employees (29%) are extremely happy with their current financial well-being.

Table 1
"Please indicate the extent to which you agree or disagree with the following statements..."
Base: 1181 employed U.S. adults in firms of 10-1,000 employees and 536 retirees

Agree/Disagree
(% of respondents agreeing
completely or somewhat)
1 Qtr 2007 1 Qtr 2006
EE
1 Qtr 2005
EE
1 Qtr 2004
EE
1 Qtr 2003
EE
Retiree EE
I am very concerned about my long-term financial future. 53%sig 73% 73% 75% 76% 75%
I am extremely happy about my current financial well-being. 44%sig 29% 27% 27% 34% 25%
I have not yet planned for retirement savings/security. N/A 24%SIG 30% 28% 26% 27%

SIG= Significant at the 95% confidence level
sig – varies significantly (95% level) from retiree and employee comparison

  • Male employees are significantly more likely than female employees to say they agree completely or somewhat with being extremely happy about their current financial well-being (34% vs 24%).

Investment Changes

Changing market conditions can spur some individuals to make changes to their investments. To measure what type of changes employees are making, they were asked to identify if and how they are moving their retirement savings. A significantly higher percentage (79%) of employees who have retirement savings are not making changes to how their investments are invested than last year at this time. Twenty-one percent of the employees who have retirement savings are making changes with 12% moving to stable investments and 9% moving to more volatile investments. There was a significant decline in the percentage of employees moving from more volatile to more stable investments in 2007 when compared to 2006.
Significantly more retirees (22%) than employees (12%) are moving from more volatile to more stable investments.

Table 2
"Given the current stock market and economic conditions, have you made changes in how you have your retirement savings invested – moving from volatile investments to more stable investments."
Base: 1013 employed U.S. adults in firms of 10-1,000 employees with retirement savings and 417 retirees

Made changes do to stock market and economic conditions 1 Qtr 2007
Retiree
1 Qtr 2007
EE
1 Qtr 2006
EE
1 Qtr 2005
EE
1 Qtr 2004
EE

Yes – I moved from more volatile to more stable investments

22%sig 12%SIG 16% 22% 19%

Yes – I moved from more stable investments to more volatile investments

2%sig 9% 9% 9% 8%

No – I have not made any changes

76% 79%SIG 75% 70% 73%

N=417 N=1013 N=1101 N=916 N=577

SIG= Significant at the 95% confidence level
sig – varies significantly (95% level) from retiree and employee comparison

Income Tax Refunds

Among those employees who have a feeling for whether or not they will receive a federal or state tax refund for 2006, 83% expect to receive a refund. There has been no significant change since first quarter of 2006. Significantly fewer retirees (40%) than employees (83%) expect to receive a tax refund this year.

When asked what they plan to do with the refund, significantly more employees (44%) than retirees (15%) plan to pay down or pay off short-term debts. Approximately four in ten retirees (43%) and employees (41%) plan to save or invest the refund. As seen in Table 5, nine out of ten retirees and employees are aware the IRS can direct deposit the refund into a checking or savings account.

Table 3
"Do you expect to receive a federal or state tax refund for 2006?"
Base: 1031 employed U.S. adults in firms of 10-1,000 employees and 425 retirees who have a feeling for whether or not they will receive a federal or state tax refund for 2006.

Expect to receive a tax refund 1 Qtr 2007 1 Qtr 2006
EE
1 Qtr 2003
EE
Retiree EE
Yes 40%sig 83% 84% 83%
No 60%sig 17% 16% 17%
  N=425 N=1031 N=1145 N=975

SIG= Significant at the 95% confidence level
sig – varies significantly (95% level) from retiree and employee comparison

Table 4
"What do you plan to do with your tax refund? Please select all that apply."

Base: 814 employed U.S. adults in firms of 10-1,000 employees and 193 retirees who expect to receive a refund

Plans for tax refund 1 Qtr 2007 1 Qtr 2006
EE
1 Qtr 2003
EE
Retiree EE
Pay down or pay off short-term debts 15%sig 44% 44% 50%
Save or invest the refund 43% 41% 38% 31%
Pay down or pay off longer-term debts. 7%sig 14% 17% 14%
Spend on consumer products – clothing, electronics, etc. 5% 12%SIG 16% 14%
Spend on a big ticket item 2% 5% 7% 16%
Other 10% 11% 10% 13%
Not Sure 24%sig 8% 8% N/A
  N=193 N=814 N=945 N=740

SIG= Significant at the 95% confidence level
sig – varies significantly (95% level) from retiree and employee comparison

  • Male employees are significantly more likely than female employees to say they will save or invest the refund (47% vs 34%).

Table 5
"Did you know that the IRS can direct deposit your refund into your checking or savings account?"
Base: 1181 employed U.S. adults in firms of 10-1,000 employees and 536 retirees

Knew IRS can direct deposit your refund 1 Qtr 2007
Retiree
1 Qtr 2007
EE
Yes 91% 94%
No 9% 6%
  N=536 N=1181

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

Financial Situation Concerns

Employees and retirees were asked to identify concerns they have regarding their current financial situation from a provided list. As shown in Table 6, there are many significant differences between how employees and retirees responded and in how employees responded this year when compared to last year at this time. One of the most notable differences is that one quarter of the retirees felt none of the items listed was a concern compared to only 7% of the employees.

Table 6
"Which of the following are the main concerns you have regarding your current financial situation? Please select all that apply."
Base: 1181 employed U.S. adults in firms of 10-1,000 employees and 536 retirees

Main concerns with current financial situation 1 Qtr 2007 1 Qtr 2006
Retiree EE
Ability to save for retirement 7%sig 65% 62%
Protecting my financial assets due to an unexpected event (i.e. death, disability) 41% 43% 46%
Covering monthly expenses 35% 40%SIG 44%
Ability to reduce credit card debt or other short-term debt 17%sig 46%SIG 41%
Saving for my children's education 2%sig 21%SIG 28%
Other 10%sig 3%SIG 6%
Staying employed 1%sig 36% N/A
Too much time spent at work and too little personal time is eroding my quality of life 2%sig 29% N/A
Physical safety and security for my family and me 17% 22% N/A
None of these 26%sig 7% 8%
  N=536 N=1181 N=1374

SIG= Significant at the 95% confidence level
sig – varies significantly (95% level) from retiree and employee comparison

  • Female employees are significantly more likely than male employees to say they are concerned about covering monthly expenses (48% vs 35%) and reducing credit card debt or other short-term debt (52% vs 40%).

Real Estate Market

Employees and retirees were asked if they had personally delayed selling a home based on the real estate market and the potential impact that decision has had on their retirement date. Very few employees (4%) and retirees (3%) have decided to put off the sale of their home based on the market.

Table 7
"If you were planning on selling a home this year, have you decided to put off the sale because of the declining real estate market?"
Base: 1181 employed U.S. adults in firms of 10-1,000 employees and 536 retirees

Put off sale of home due to declining real estate market 1 Qtr 2007 1 Qtr 2006
Retiree EE
Yes, I have decided to put off the sale based upon the market. 3% 4% 4%
No, the market hasn't impacted my decision to sell the home this year. 8% 10% 11%
I was not planning to sell a home this year. 90% 85% 85%

SIG= Significant at the 95% confidence level
sig – varies significantly (95% level) from retiree and employee comparison

Table 8
"Will this have any impact on when you are able to retire?"
Base: N=47* employed U.S. adults in firms of 10-1,000 employees who put off the sale of a house

Impact on when you are able to retire 1st Qtr 2007
EE
1 Qtr 2006
EE
No impact on estimated retirement. 66% 63%
Yes, it will impact when I am able to retire. 34% 37%

* Small base. Data should be used directionally.

Table 9
"Did the real estate market have any impact on when you were able to retire?"
Base: N=14* retirees who put off the sale of a house

Impact of real estate market on retirement 1 Qtr 2007
Retiree
No impact on my retirement date. 100%
Yes, there was an impact on my retirement date. 0%

* Small base. Data should be used directionally.

Investment Outlook

Employees and retirees were asked how they are feeling about their investment outlook in 2007 compared to 2006. Significantly more retirees (72%) than employees (53%) feel there is no change in their investment outlook.

Table 10
"How are you feeling about your investment outlook for 2007 compared to 2006?"
Base: 1181 employed U.S. adults in firms of 10-1,000 employees and 536 retirees

Feelings about investment outlook for 2007 1 Qtr 2007 1 Qtr 2006
EE
Retiree EE
More optimistic about my investment outlook in 2007 17%sig 32% 30%
Less optimistic about my investment outlook in 2007 12% 14%SIG 19%
No change in my investment outlook 72%sig 53% 51%

SIG= Significant at the 95% confidence level
sig – varies significantly (95% level) from retiree and employee comparison

Change To Overall Spending

Employees and retirees were asked to describe how the current economy has impacted their overall spending in the past two months - 12% of employees and 7% of retirees said they had increased their overall spending versus 39% of the employees and 41% of the retirees that said they had decreased their spending a little or greatly.

Table 11
"Which of the following best describes how the current economy has impacted your overall spending in the past two months?"
Base: 1181 employed U.S. adults in firms of 10-1,000 employees and 536 retirees

How economy has impacted spending in past two months 1 Qtr 2007 1 Qtr 2004
EE
Retiree EE
I have greatly increased my overall spending. 1% 2%SIG 4%
I have increased my overall spending a little. 6% 10%SIG 26%
My overall spending is about the same. 53% 50%SIG 26%
I have reduced my overall spending a little. 24% 27%SIG 31%
I have greatly reduced my overall spending. 17% 12% 13%
  N=536 N=1181 N=1235

SIG= Significant at the 95% confidence level
sig – varies significantly (95% level) from retiree and employee comparison

  • Female employees are significantly more likely than male employees to say they reduced their spending a little/greatly in the past 2 months (50% vs 30%).

Attitude Regarding Financial Well-Being in Today's Economy

Employees and retirees were asked to identify how secure or insecure they feel about their financial well-being in today's current economy. Forty-one percent of the employees said they feel very/somewhat insecure. Thirty-five percent of the retirees feel very/somewhat insecure.

Table 12
"Which of the following best describes how secure you feel about your financial well-being in today's current economy?"
Base: 1181 employed U.S. adults in firms of 10-1,000 employees and 536 retirees

Feelings about financial well-being in economy 1 Qtr 2007 1 Qtr 2004
EE
Retiree EE
Very Insecure 8% 10%SIG 13%
Somewhat Insecure 27% 31% 31%
Neither Secure nor Insecure 27% 29% 26%
Somewhat Secure 30% 27% 26%
Very Secure 7%sig 4% 4%
  N=536 N=1181 N=1235

SIG= Significant at the 95% confidence level
sig – varies significantly (95% level) from retiree and employee comparison

Financial Planning Services

Employees and retirees were asked whom they would normally go to first for financial advice. The single response given by the largest portion of retirees (38%) was that they don't seek advice from other individuals. The largest portion of employees (29%) said they would go first to family or friends. Female employees were significantly more likely than males to go to family and friends first (34% vs 26%). When combining the responses for third party professionals, forty-three percent of retirees and 38% of employees responded they would go to a third party professional such as a certified financial planner, bank or financial institution, accountant, benefit provider or financial services company, stock broker, insurance agent, or attorney. Additional details are provided in Table 13.

Table 13
"To whom would you normally go first for financial advice?"
Base: 1181 employed U.S. adults in firms of 10-1,000 employees and 536 retirees

Ask first for financial advice 1 Qtr 2007 2 Qtr 2006 2 Qtr 2002
EE
Retiree EE Retiree EE
Family or friends 11%sig 29%SIG 11% 35% 30%
Certified financial planner 18% 13% 16% 14% 12%
Bank or financial institution 11% 10% 9% 10% 12%
Accountant 7% 7% 5% 7% 7%
Internet 2%sig 10% 2% 10% 7%
Benefit provider or financial services company 3% 5% 4% 5% 5%
Stock Broker 3% 2% 5% 2% 4%
Insurance agent or broker <1% 1% 1% <1% 3%
Attorney 1%^ <1% 3% 1% 1%
Employer - 1% N/A 1% 1%
News Media (e.g. magazines, newspapers, radio, TV) 2% 2% 1% 2% N/A
Other 3% 1%SIG 3% 3% 2%
Don't seek advice from other individuals 38%sig 18%SIG 40% 13% 17%
  N=536 N=1181 N=638 N=1100 N=982

SIG= Significant at the 95% confidence level
sig – varies significantly (95% level) from retiree and employee comparison
^ – varies significantly (95% level) from retiree and retiree comparison

Financial Planner Attributes

Employees and retirees were asked to identify the top 3 attributes they look for in a financial planner from a provided list. They agreed on the top two attributes which were "trustworthy" and "knowledgeable". Retirees chose reputation as the third most highly rated attribute. Investment performance history came in third with the employee group.

Table 14
"What are the top 3 attributes you look for in a financial planner?"
Base: 1181 employed U.S. adults in firms of 10-1,000 employees and 536 retirees

Top 3 attributes for financial planner 1 Qtr 2007
Retiree
1 Qtr 2007
EE
Trustworthy 59% 60%
Knowledgeable 48% 54%
Investment performance history 30% 34%
Reputation 37% 33%
Experience/number of years in the business 23% 23%
Recommended 21% 23%
Customer service oriented 14%sig 20%
Chemistry/personality fit 10%sig 18%
Method of financial planner compensation 14%sig 9%
Certifications/designations 8%sig 4%
Other 9%sig 5%
  N=536 N=1181

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

Two out of three employees (68%) and almost half of the retirees (48%) would change their financial planner if they felt a lack of responsiveness. Investment performance would cause almost half of the employees (45%) and over a third of the retirees (37%) to change financial planners.

Table 15
"Which of the following would cause you to change financial planners?"
Base: 1181 employed U.S. adults in firms of 10-1,000 employees and 536 retirees

Cause change in financial planner 1 Qtr 2007
Retiree
1 Qtr 2007
EE
Lack of responsiveness 48%sig 68%
Investment performance 37%sig 45%
No contact 21%sig 39%
Recommendation from a friend or relative to try someone else 4%sig 10%
None of the above 27%sig 10%
  N=536 N=1181

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

  • Male employees are significantly more likely than female employees to say they would change financial planners based on a recommendation from a friend or relative to try someone else (13% vs 7%).

Pension Protection Act

The landmark retirement legislation (the Pension Protection Act) signed into law in late 2006 attempts to strengthen employee's retirement security through changes including: eased defined benefit plan rules, legitimizing cash balance plans, encouraging automatic enrollment in 401(k) plans, making permanent the improvements in the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), and allowing for the creation of a combination defined benefit and 401(k) plan, called the DB(k).

Employees and retirees were asked their level of agreement with various statements regarding the Pension Protection Act (PPA). As seen in Table 16, the results were significantly different between retirees and employees. Not surprising, employees were more likely than retirees to agree that PPA will have more impact on their long-term financial future.

Table 16
"What is your level of agreement with each of the following statements regarding the Pension Protection Act (PPA)? Please indicate the extent to which you agree or disagree with the following statements..."
Base: 1181 employed U.S. adults in firms of 10-1,000 employees and 536 retirees

Pension Protection Act
(% of respondents agree completely/somewhat agree)
1 Qtr 2007
Retiree
1 Qtr 2007
EE
PPA will have a positive impact on my long-term financial picture. 9%sig 22%
PPA will better equip me to save more money for retirement. 8%sig 22%
PPA will give me more options and flexibility to choose from in how I approach my financial planning. 11%sig 23%
PPA will have little or no impact on my long-term financial picture. 48%sig 25%

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

Congress and Legislation

Employees and retirees are in agreement on the impact the new Democratically controlled congress will have on their financial well-being in the upcoming year as shown in Table 17.

Retirees and employees were asked what type of impact different domestic initiatives from the current federal legislative agenda would have on their personal financial well-being. Employees were significantly more likely than retirees to say that "middle class tax cuts" and "lower interest rates on student loans" would have a positive impact. Significantly more retirees than employees feel "Medicare prescription drug reform" will have a positive impact on their personal financial well-being. The majority of employees and retirees feel that "raising the minimum wage" will have little or no impact on personal financial well-being. See Table 18 for the details.

Table 17
"With the new Democratically controlled congress, what do you think the impact will be on your financial well-being in the upcoming year?"
Base: 1181 employed U.S. adults in firms of 10-1,000 employees and 536 retirees

Impact of Democratic Congress on financial well-being 1 Qtr 2007
Retiree
1 Qtr 2007
EE
Worse 25% 23%
About the same 51% 48%
Better 24% 29%
  • Male employees are significantly more likely than female employees to say the impact of a Democratically controlled congress on their financial well-being will be worse in the upcoming year (30% vs 15%).

Table 18
"The new Congress has outlined its current federal legislative agenda which includes the domestic initiatives listed below. Please rate each domestic initiative in terms of what impact you believe it will have on your personal financial well-being."
Base: 1181 employed U.S. adults in firms of 10-1,000 employees and 536 retirees

1st Qtr 2007 results

Impact of Congress domestic iniatives on financial well-being Positive impact Little or no impact Negative impact
Retiree EE Retiree EE Retiree EE
Middle class tax cuts 47%sig 64% 46%sig 32% 7% 4%
Lower interest rates on student loans 11%sig 28% 79%sig 66% 11%sig 6%
Raising the minimum wage 17% 19% 69% 64% 14% 17%
Medicare prescription drug reform 42%sig 29% 50%sig 64% 8% 8%

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

  • Employees 55 years old and older are significantly more likely than all other age groups to feel Medicare prescription drug reform will have a positive impact.
  • Employees age 18-34 are significantly more likely than all other age groups to feel lower interest rates on student loans will have a positive impact.

Employees and retirees were also asked to provide feedback regarding the impact of some current issues on personal financial well-being. The two items viewed as having a negative impact by over 40% of employees and retirees were the Iraq war and privatizing social security. See Table 19 for additional detail.

Table 19
"In addition to the proposed legislative changes, please rate the following current issues in terms of what impact you believe it will have on your personal financial well-being."
Base: 1181 employed U.S. adults in firms of 10-1,000 employees and 536 retirees

1st Qtr 2007 Results

Impact of current issues on financial well-being Positive impact Little or no impact Negative impact
Retiree EE Retiree EE Retiree EE
Government-sponsored health care 34% 35% 45% 39% 21% 25%
The Iraq War 11% 10% 41% 38% 49% 52%
Global warming 13% 10% 55% 53% 33% 37%
Immigration reform 28% 24% 58% 56% 14%sig 20%
Privatizing social security 15%sig 26% 34% 32% 50%sig 41%

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

  • Male employees are significantly more likely than female employees to say privatizing social security, immigration reform and the Iraq War will have a positive impact on their personal financial well-being.

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