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The Principal Financial Well-Being IndexSM Employee Questions - Second Quarter 2007

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 (63%) are significantly more likely than retirees (48%) to be concerned about their long-term financial future. However, a significantly smaller number of employees (63%) this year are concerned about their long-term financial future than last year at this time (68%).

Almost half (45%) of the retirees are extremely happy about their current financial well-being compared to 31% of the employees. There are significant differences between responses from retirees and employees – indicated with "sig" below.

A significantly smaller percentage of employees (24%) this year say they have not yet planned for retirement savings and security than last year at this time (30%).

Table 1
"Please indicate the extent to which you agree or disagree with the following statements…"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees and 548 retirees

Agree/Disagree
(% of respondents agreeing completely or somewhat)
2 Qtr 2007 2 Qtr 2006 2 Qtr 2005 2 Qtr 2004 2 Qtr 2003 2 Qtr 2002 2 Qtr 2001
Retiree EE Retiree EE EE EE EE EE EE

I am very concerned about my long-term financial future.

48%sig 63%SIG 48% 68% 74% 76% 73% 78% 84%

I am extremely happy about my current financial well-being.

45%sig 31% 45% 30% 29% 28% 28% 27% 24%

I have not yet planned for retirement savings/security.

N/A 24%SIG 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

Retiree Healthcare Benefits

Retirees (53%) are significantly more likely than employees (22%) to have worked for an employer that offers retiree healthcare benefits. Employees are much more likely than retirees to be unsure of whether or not they have or do work for an employer that offers retiree healthcare benefits.

Employees and retirees who have access to retiree healthcare benefits were asked if they had any safety nets in place in the event that the employer eliminates the benefit. Approximately one out of three employees and retirees have no safety net in place. The top four safety nets in place for retirees and employees are savings account, retirement nest egg, home equity and selling liquid assets. Employees are significantly more likely than retirees to say they would forgo elective medical procedures.

Table 2
"Does your current or past employer offer retiree healthcare benefits?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees and 548 retirees

Retiree Healthcare Benefits 2 Qtr 2007
Retiree
2 Qtr 2007
EE
Yes 53%sig 22%
No 42% 50%
Not Sure 5%sig 28%
  N=548 N=1137

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

Table 3
"What type of safety net do you have in place if your employer/past employer eliminates your retiree healthcare benefits? Please select all that apply"
Base: employees and retirees who have retiree healthcare benefits

Type of safety net in place 2 Qtr 2007
Retiree EE
Savings account 30% 37%
Retirement nest egg 32% 36%
Home equity 32% 31%
Sell liquid assets (stocks, bonds, mutual funds) 34% 24%
Forego elective medical procedures 8%sig 18%
Borrowing from family and friends 1%sig 9%
Other 15% 9%
I have no safety net in place currently. 28% 33%
  N=321 N=262

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

Financial Planning Information

Employees and retirees were asked how they prefer to receive information about financial planning. Approximately four in ten employees and retirees prefer print information. Female employees are significantly more likely than male employees to prefer printed information (42% vs. 32%). Employees are significantly more likely than retirees to prefer one-on-one meetings, email communications, or group meetings. Email communication has varying levels of preference depending on age. Employees age 44 and under are significantly more likely than employees 45 and older to prefer email communication.

Table 4
"How would you prefer to receive information about financial planning?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees and 548 retirees

Financial Planning Information 2 Qtr 2007
Retiree
2 Qtr 2007
EE
One-on-one meetings 26%sig 39%
Print information 37% 37%
Email communications 18%sig 31%
>Group meetings 7%sig 16%
Representatives by telephone 3% 3%
Other 27%sig 6%
  N=548 N=1137

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

Home Improvements

Approximately one-third of the retirees and almost half of the employees surveyed are planning to do home improvements this summer. The majority of retirees and employees will be using money from savings to pay or help pay for the home improvements. Credit cards and home equity loans will also be used to finance the home improvements.

Table 5
"Are you planning to do any home improvement projects this summer?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees and 548 retirees

Planning home improvement projects 2 Qtr 2007
Retiree
2 Qtr 2007
EE
Yes 35%sig 45%
No 65%sig 55%
  N=548 N=1137

Table 6
"How do you plan to pay for the home improvement projects? Please select all that apply."
Base: employees and retirees who plan to do a home improvement project this summer

How to pay for home improvement projects 2 Qtr 2007
Retiree
2 Qtr 2007
EE
Savings 73% 63%
Credit Card 13% 16%
Home Equity Loan 11% 12%
Tax Refund 4% 11%
Personal Loan 2% 2%
Loan from retirement account 1% 2%
Other 16% 19%
  N=189 N=511

Financial Analysis of Coverage

Two out of three retirees and employees responded they have not had a financial analysis of any of several financial planning areas listed within the past three years. The good news is the percentage has declined significantly since 2006 for both retirees and employees. Retirement savings was listed by retirees and employees most often, as the item that has been reviewed for adequacy within the past three years. Employees aged 18-34 were significantly less likely than any other age group to have had a financial analysis done on their retirement savings.

Table 7
"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 select all that apply."
Base: 1137 employed U.S. adults in firms of 10-1,000 employees and 548 retirees

Financial Analysis of Coverage 2 Qtr 2007 2 Qtr 2006 2 Qtr 2003
Retiree EE Retiree EE EE
Retirement Savings 26%* 25%SIG 20% 19% 21%
Life Insurance (survivor benefits) 11% 15% 13% 13% 19%
Savings Goals 9% 14% 8% 12% 14%
Estate Planning 15%sig 8%SIG 13% 5% 9%
Disability Income Protection 4% 7%SIG 6% 5% 8%
Education Funding 1%sig 5% 2% 5% 6%
None of these 67%* 66%SIG 73% 73% 69%
  N=548 N=1137 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
* - varies significantly (95% level) from previous results retiree comparison

American Dream

Employees and retirees were asked if they feel the American Dream has been or will be harder to achieve than it was for their parent's generation. Over half (56%) of the employees agree it has been or will be harder to achieve compared to only 37% of the retirees. The results this year are significantly different from results in third quarter of 2005 when 70% agreed it has been or will be harder for them to achieve the American dream than it was for their parent's generation.

Table 8
"The notion of "The American Dream" has involved holding a good job, owning a home, living in a secure community, and sending the children to a good school. To what extent do you agree with the following phrase: The American Dream has been or will be harder for me to financially achieve than it was for my parent's generation."
Base: 1137 employed U.S. adults in firms of 10-1,000 employees and 548 retirees

Agree/Disagree 2 Qtr 2007 3 Qtr 2005
Retiree EE EE
Agree completely 17%sig 31%SIG 40%
Agree somewhat 20% 25%SIG 30%
Neither agree nor disagree 24%sig 17% 15%
Disagree somewhat 22% 19%SIG 10%
Disagree completely 17%sig strong>8%SIG 5%

SIG – varies significantly (95% level) from previous results employee comparison

Retiree Basic Necessities

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, with 91% of the employees saying they would go back to work compared to only 57% of the retirees. Getting a reverse mortgage was mentioned by significantly more retirees (35%) than employees (20%) as was relying on children, family and friends to make ends meet and declaring bankruptcy. This question was also asked in 2006 and retirees responded with significant differences. Results show that retirees are significantly more likely this year to do all of the items listed than they were last year at this time.

Table 9
"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: 1137 employed U.S. adults in firms of 10-1,000 employees and 548 retirees

Do not have enough savings 2 Qtr 2007 2 Qtr 2006
Retiree EE Retiree EE
Go back to work 57%sig* 91% 47% 90%
Get a reverse mortgage 35%sig* 20% 28% 18%
Rely on my children, family and friends to make ends meet 15%sig* 7%SIG 9% 11%
Declare bankruptcy 11%sig* 6%SIG 6% 9%
Other 21%sig* 8%SIG 30% 11%

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

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 when compared with last year's results as shown in Table 10. Additionally, compared to all other age categories, significantly more employees age 18-34 feel they will need 90% or more of their pre-retirement income to maintain their current lifestyle.

Table 10
"How much of your pre-retirement income will you most likely need as a retiree to maintain your current lifestyle?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees and 548 retirees

Pre-retirement income needed 2 Qtr 2007 2 Qtr 2006
Retiree EE Retiree EE
Less than 50% 18%sig 7% 21% 7%
50%-64% 28%* 28%SIG 21% 18%
65%-79% 27%* 31% 16% 32%
80%-89% 15% 19%SIG 15% 24%
90% or more 13%* 15%SIG 27% 20%

SIG – varies significantly (95% level) from previous results employee comparison
sig – varies significantly (95% level) from retiree and employee comparison
* - varies significantly (95% level) from previous results retiree 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 11, there are significant differences in how it is impacting retirees and employees when compared to last year. Significantly fewer employees this year than last year say it has impacted holiday vacation plans, automobile purchasing decisions, and the grade of fuel used. However, it is still influencing nearly three out of ten employees' and retiree's automobile purchasing decisions and holiday vacation plans. Almost four in ten retirees responded that it has made no impact.

There are some differences in results based upon region of the country. Employees in the South are significantly more likely than employees in other regions of the country to say it has impacted holiday vacation plans.

Significantly more people in the West than any other region say it has impacted their decision to carpool or use an alternative means of transportation.

Table 11
"Has the rising cost of fuel influenced any of the following in your life? Please select all that apply."
Base: 1137 employed U.S. adults in firms of 10-1,000 employees and 548 retirees

Cost of fuel 2 Qtr 2007 2 Qtr 2006 3 Qtr 2005
Retiree EE Retiree EE EE
Automobile purchasing decisions 29% 33%SIG 31% 38% 32%
Holiday vacation plans 28%* 29%SIG 34% 40% 41%
The decision to carpool or use alternate means of transportation on a given day 9%sig 18% 7% 16% 17%
Other 22%* 18% 30% 21% 14%
Grade of fuel used 9% 14%SIG 11% 18% 19%
The rising cost of fuel has made no impact on my lifestyle 39%sig* 29% 33% 27% 29%
  N=548 N=1137 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
* - varies significantly (95% level) from previous results retiree comparison

Summer Vacation Plans

Employees and retirees were provided with a list of things that could potentially impact their summer plans. Rising fuel prices were listed by approximately half of the retirees (46%) and employees (47%) as something they fear that could potentially impact their summer vacation plans. Almost half of the employees (47%) also fear not having enough money saved for vacation could impact their plans. More so than any other age group, not having enough money saved for vacation is the primary concern for employees age 18-34 (62%). Almost four in ten employees fear they may be too busy at work which could impact their summer vacation plans.

Four in ten retirees have no fear that anything will impact their summer vacation plans, more so than employees.

Table 12
"Which of the following do you fear could potentially impact your summer vacation plans? Please select all that apply"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees and 548 retirees

Impact your summer vacation plans 2 Qtr 2007
Retiree EE
Rising fuel prices 46% 47%
Having enough money saved for vacation 23%sig 47%
Too busy at work N/A 38%
Loss of job N/A 15%
Job switch N/A 12%
Airline delays/cancellations 12% 11%
Other 7% 6%
I have no fear that anything will impact my summer vacation plans. 40%sig 17%
  N=548 N=1137

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

Years in Retirement

Retirees plan to spend significantly more years in retirement (24.6 average) than employees (21.4 average). Employees age 55 and up plan to spend significantly fewer years in retirement compared to employees in other age groups as seen in table 14.

Table 13
"How many total years do you plan to spend in retirement?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees and 548 retirees

Total years 2 Qtr 2007 2 Qtr 2006
Retiree EE Retiree EE
0-10 years 10%sig 18%SIG 10% 23%
11-20 years 33%sig 42% 31% 39%
21-30 years 42%sig* 31%SIG 36% 26%
31-40 years 11%sig* 5%SIG 16% 7%
41-50 years 2%* 3% 5% 2%
51 or more years 1% 1% 2% 2%
Average Years in Retirement 24.6sig* 21.4 26.2 21.1

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

Table 14
"How many total years do you plan to spend in retirement?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees

Total years 2nd Qtr 2007 Employee Current Age
18-34 35-44 45-54 55+

0-10 years

18% 17% 16% 24%

11-20 years

38% 43% 39% 54%
21-30 years 33% 32% 37% 18%^
31-40 years 8% 6% 2% 2%
41-50 years 3% 2% 5% 2%
51 or more years <1% 1% <1% 1%
Average Years in Retirement 22.2 21.6 22.2 18.7^
  N=423 N=270 N=245 N=199

^ – varies significantly (95% level) from all other age groups

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 (36%) and employees (36%) responded with the lowest response of $4,000. There were no significant differences this year in responses between employees and retirees. However, when compared with last year's retiree results, a significantly larger percentage of retirees responded that they could take out $8,000 or $10,000 per year in retirement and not run out of money.

Table 15
"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: 1137 employed U.S. adults in firms of 10-1,000 employees and 548 retirees

Spend from savings 2 Qtr 2007 2 Qtr 2006
Retiree EE Retiree EE
$4,000 36% 36% 41% 34%
$6,000 20%* 21% 25% 22%
$8,000 18%* 18% 13% 16%
$10,000 17%* 15%SIG 12% 20%
Over $10,000 9% 10% 10% 9%

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

Table 16
"Approximately how often each year do you do each of the following check-ups?"
Base: 1137 employed U.S. adults in firms of 10-1,000 employees and 548 retirees

Check-ups 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

2006

39% 54% 19% 24% 19% 13% 10% 4% 3% 2% 9% 4%

2007

33%
sig*
50% 27%* 23% 25%
sig*
15% 6%* 5% 3% 3% 5%* 4%
Financial Planning Check-up

2006

10% 4% 2% 2% 9% 5% 15% 17% 19% 26% 44% 47%

2007

5%* 4% 2% 2% 10%sig 6% 23%
sig*
16% 20%sig 33%SIG 41% 40%
SIG
Dental Health Check-up

2006

6% 3% 6% 5% 28% 41% 22% 18% 20% 27% 17% 8%

2007

7% 5%
SIG
7% 4% 35%
sig*
45% 16%* 20% 21% 20%SIG 14%sig 5%
SIG
Heater/Air conditioner Check-up

2006

1% 1% 1% 1% 14% 9% 39% 30% 26% 32% 19% 26%

2007

<1% 1% 2% 1% 17%sig 9% 38%
sig
26%SIG 30% 34% 13%sig* 29%
Medical Check-up

2006

29% 10% 9% 6% 19% 14% 31% 39% 10% 26% 2% 6%

2007

32%sig 10% 11%sig 5% 20%sig 13% 31%
sig
44%SIG 5%sig* 22%SIG 2%sig 6%
Vision Check-up

2006

2% <1% 2% 1% 15% 4% 47% 45% 32% 41% 2% 8%

2007

3%sig 1% 3%sig 1% 11%
sig*
4% 53%
sig*
41% 30%sig 42% 1%sig 13%
SIG

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

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