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

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 (72%) are significantly more likely to be concerned about their long-term financial future than retirees (44%). The percentage of retirees (44%) who are concerned about their long-term financial future is down significantly from 4th quarter of 2006 (50%).

Half (50%) 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.

Just over a quarter of employees (27%) have not yet planned for retirement savings and security. Female employees (34%) are significantly more likely to say they have not yet planned for retirement savings and security than male employees (22%).

Table 1
Please indicate the extent to which you agree or disagree with the following statements…”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

(% of respondents agreeing completely or somewhat) 4 Qtr 2007 4 Qtr 2006 4 Qtr 2005 4 Qtr 2004
Retiree EE Retiree EE EE EE
I am very concerned about my long-term financial future. 44%sig* 72% 50% 71% 73% 77%
I am extremely happy about my current financial well-being. 50%sig 30% 48% 29% 29% 34%
I have not yet planned for retirement savings/security. N/A 27% N/A 28% 25% 27%
  N=514 N=1,154 N=630 N=1,197 N=1,213 N=1,736

sig = varies significantly (95% level) from retiree and employee comparison
SIG= varies significantly (95% level) from 2006 employee comparison
"*" = varies significantly (95% level) from 2006 retiree comparison

Holiday Spending

Employees and retirees were asked about their intentions for spending in the upcoming holiday season. Almost half of both retirees (46%) and employees (49%) plan to spend between $101 and $500 this holiday season. Almost one in five employees (18%) plan to spend over $1,000 this holiday season.

Twenty-nine percent of employees and retirees plan to spend less money this holiday season than last year. Two-thirds (66%) of the employees plan to spend between $101 and $500 less than they did in last year's holiday season. Just over half (52%) of retirees say they will spend between $101 and $500 less than they did last year, while another third or so (36%) of the retirees say their spending will decrease by $100 or less than last year. Female employees (34%) are more likely than male employees (24%) to say they will spend less money this holiday season than last year.

Table 2
“How much do you plan to spend in the upcoming holiday season?”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Plan to spend 4 Qtr 2007
Retiree EE
$100 or less 11%sig 3%
Between $101 and $500 46% 49%
Between $501 and $750 9%sig 14%
Between $751 and $1000 13% 13%
Above $1000 11%sig 18%
Decline to Answer 10%sig 4%

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

Table 3
“During the upcoming holiday season, do you intend to...?”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Do you intend to 4 Qtr 2007 4 Qtr 2006 4 Qtr 2002
Retiree EE Retiree EE EE
Spend less money than last year 29%* 29%SIG 36% 47% 39%
Spend the same amount of money as last year 64% 59%SIG 60% 54% 52%
Spend more money than last year 7%sig 12%SIG 5% 9% 8%
  N=514 N=1154 N=630 N=1197 N=2,056

sig = varies significantly (95% level) from retiree and employee comparison
SIG = varies significantly (95% level) from 2006 employee comparison
"*" = varies significantly (95% level) from 2006 retiree comparison

Table 4
“How much more money are you planning on spending in the upcoming holiday season than last year?”
Base: Employees and retirees who plan to spend more this holiday season

How much more than last year 4 Qtr 2007
Retiree EE
$100 or less 22% 13%
Between $101 and $500 35% 61%
Between $501 and $1000 27% 20%
Above $1000 6% 4%
Decline to Answer 8% < 1%
N=36 N=111

Caution: due to small sample sizes data should be used directionally only

New Year's Resolutions

Employees and retirees were given a list of potential financial resolutions and asked which, if any, they intended to make as New Year's resolutions in 2008. Nearly half (49%) of the retirees responded they don't intend to make resolutions compared to 23% of the employees. The top two resolutions selected by employees were paying off credit card debt (40%) and putting a set amount of money into savings each month (39%). Compared to 2006, significantly more employees are making resolutions to put a set amount of money into savings each month (39% versus 33% in 2006) and to stop using their credit cards (22% versus 18% in 2006).

Female employees (45%) were significantly more likely than male employees (34%) to say one of their resolutions was to put a set amount of money into savings each month.

The resolution selected by the most retirees (17%) was to pay off credit card debt.

Table 6
“Which of the following, if any, do you intend to make as New Year's resolutions in 2008? Please select all that apply.”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Intend to make 4 Qtr 2007 4 Qtr 2006
Retiree EE Retiree EE
Pay off credit card debt. 17%sig 40% 13% 37%
Put a set amount of money into savings each month. 13%sig 39%SIG 12% 33%
Reduce my spending by a specific amount each month. 11%sig* 23% 15% 20%
Stop using my credit cards. 10%sig 22%SIG 10% 18%
Defer more in my defined contribution/401(k) plan. 0%sig 16% 1% 14%
Work with a financial planner or other financial advisor. 7% 8% 5% 7%
Other 2%sig 6% 4% 6%
None of these 18%sig 8% 16% 9%
I don't intend to make a resolution. 49%sig 23%SIG 51% 29%
  N=514 N=1,154 N=630 N=1,197

sig = varies significantly (95% level) from retiree and employee comparison
SIG = varies significantly (95% level) from 2006 employee comparison
"*" = varies significantly (95% level) from 2006 retiree comparison

Personal Credit

Employees and retirees were asked a series of questions regarding their personal credit. At least 6 out of 10 employees (66%) and retirees (62%) have ordered a credit report for themselves in the past. Just about half of employees (49%) and significantly fewer retirees (39%) know what their current credit score is.

Table 7
“Have you ever personally ordered a credit report?”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Ordered a credit report 4 Qtr 2007
Retiree EE
Yes 62% 66%
No 38% 34%

Table 8
“Do you know what your current credit score is?”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Current credit score 4 Qtr 2007
Retiree EE
Yes 39%sig 49%
No 61%sig 51%

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

When asked how many credit cards are in their name for personal use, 34% of retirees and 29% of employees reported 5 or more. On average, employees have 3.7 credit cards in their name for personal use and retirees report having significantly more (4.4). However, when asked how many of these cards they use on a regular basis, only 5% of retirees and 2% of employees report using 5 or more cards on a regular basis. Just over a third of both retirees (37%) and employees (38%) report using only one credit card on a regular basis. Nearly the same number of retirees (32%) and employees (36%) report using two cards regularly. The average number of cards used by retirees regularly is 2.0, while the average number for employees is 1.7.

Table 9
“How many credit cards are in your name for personal use? Please include all bank, department and gas cards.”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

How many credit cards 4 Qtr 2007
Retiree EE
0 5% 8%
1 9% 10%
2 11%sig 17%
3 16% 14%
4 12% 10%
5 or more 34%sig 29%
Decline to answer 11% 11%
Average 4.4%sig 3.7

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

Table 10
“How many of these personal credit cards do you use on a regular basis?”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

How many personal credit cards 4 Qtr 2007
Retiree EE
0 6% 9%
1 37% 38%
2 32% 36%
3 16% 12%
4 5% 4%
5 or more 5% 2%
Average 2.0sig 1.7

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

Personal Debt

Two-thirds of retirees report having no credit card debt that they carry over from month to month, compared to a third of employees. Nearly a quarter (23%) of employees report having between $1 and $1,000 in credit card debt that they carry from month to month. Another 16% of employees report having between $1,001 and $5,000 in credit card debt. One in ten employees report having between $5,001 and $10,000 in credit card debt, while another 10% of employees have over $10,000 in credit card debt.

Aside from credit card debt, employees and retirees were asked about other personal debt on things like student loans, cars, and medical bills. Once again, just about two-thirds (64%) of retirees report having no other personal debt; significantly fewer employees (29%) report having no other personal debt. Approximately 14% of employees have over $20,000 in personal debt. Please see Table 12 for more detail.

Table 11
“How much credit card debt do you carry over month to month?”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Debt carry over month to month 4 Qtr 2007
Retiree EE
None 66%sig 33%
Between $1 to $1,000 13%sig 23%
Between $1,001 to $5,000 8%sig 16%
Between $5,001 to $10,000 4%sig 10%
Over $10,000 2%sig 10%
Decline to answer 8% 8%

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

Table 12
“Besides credit card debt, how much other personal debt do you have on things like student loans, cars, medical bills, and other personal loans? Please do not include the amount you owe on your home.”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Personal debt 4 Qtr 2007
Retiree EE
None 64%sig 29%
Between $1 to $1,000 5%sig 11%
Between $1,001 to $5,000 7% 10%
Between $5,001 to $10,000 7%sig 14%
Between $10,001 to $20,000 7%sig 15%
Over $20,000 3%sig 14%
Decline to answer 6% 7%

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

Housing

Half of retirees (51%) have their homes completely paid off. One in five retirees owes up to $100,000 on their home.

Nearly a third (32%) of employees do not own a home. Another three in ten (29%) of the employees owe over $100,000 on their home. Employees are less likely to own a home than retirees and they are significantly more likely to owe more on their home than retirees.

The older an employee is, the more likely he/she is to have their home completely paid off. Younger employees (both 18-34 year olds and 35-44 year olds) are significantly more likely to not own a home than older employees. Please see Table 13 for details.

Table 13
How much do you owe on your home?”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Owe on your home 4 Qtr 2007 4 Qtr 2007 EE Age Groups
Retiree EE 18-34 35-44 45-54 55+
$0; my home is completely paid off 51%sig 13% 5% 5% 24%^ 28%^
Between $1 to $50,000 13%sig 7% 1% 3% 10%^ 17%^
Between $50,001 to $100,000 7%sig 13% 7% 18%^ 18%^ 13%^
Between $100,001 to $200,000 7%sig 18% 18% 18% 21%^ 13%
Between Over $200,000 2%sig 11% 10% 16%^ 7% 9%
I am not a homeowner 16%sig 32% 54%^ 32%^ 14%^ 12%
Decline to answer 5% 6% 4% 7% 6% 7%

sig - varies significantly (95% level) from retiree and employee comparison
^ - varies significantly (95% level) from at least one age group

Homeowners were asked if their mortgage payments have increased in the past, or if they anticipate their payments will increase in the next year due to reasons other than increases in property taxes or homeowners insurance. Sixteen percent of employees and 10% of retirees have seen rising mortgage payments in the past year, while another 8% of employees and 3% of retirees expect to see increases over the next year.

Table 14
“Have your mortgage payments increased in the past year, or do you anticipate your payments will increase in the next year? Please do not consider any payment increases due to an increase in property taxes or homeowner's insurance.”
Base: All respondents who are homeowners who owe money on their home

Mortgage payments anticipate increase 4 Qtr 2007
Retiree EE
My payments have increased in the past year. 10% 16%
I anticipate that my mortgage payments will increase in the next year. 3% 8%
My mortgage payments have not increased in the past year, nor do I anticipate they will increase in the next year. 87%sig 76%
N=176 N=595

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

Table 15
“How much has your mortgage payment increased in the past year?”
Base: All respondents who are homeowners whose mortgage has increased in the past year

Mortgage payments increased 4 Qtr 2007
Retiree EE
Between $1 and $50 per month 51% 22%
Between $51 and $100 per month 28% 44%
Between $101 and $300 per month 11% 13%
Between $301 and $500 per month 9% 11%
Over $500 per month 2% 11%
N=21 N=90

Caution: due to small sample sizes data should be used directionally only

Table 16
“How much do you anticipate your mortgage payment increase will be in the next year?”
Base: All respondents who are homeowners who anticipate a mortgage payment increase in the next year

Anticipate your mortgage payment increase 4 Qtr 2007
Retiree EE
Between $1 and $50 per month 80% 30%
Between $51 and $100 per month 6% 15%
Between $101 and $300 per month 8% 34%
Between $301 and $500 per month 0% 17%
Over $500 per month 0% 0%
N=7 N=53

Caution: due to small sample sizes data should be used directionally only

A small percentage of employees (10%) and retirees (4%) are looking to refinance their mortgage in the next 3 to 6 months.

Table 17
“Are you looking to refinance your mortgage in the next 3 to 6 months?”
Base: All respondents who are homeowners who owe money on their home

Refinance your mortgage 4 Qtr 2007
Retiree EE
Yes 4% 10%
No 87% 80%
Not Sure 9% 10%
N=176 N=595

A very small minority of both employees (4%) and retirees (5%) are fearful of losing their home because they can no longer afford to make the payments.

Table 18
“Are you afraid you will lose your home because you can no longer afford to make the payments?”
Base: All respondents who are homeowners who owe money on their home

Afraid you will lose your home 4 Qtr 2007
Retiree EE
Yes, I am fearful of losing my home because I can no longer afford to make the payments. 5% 4%
No, I am not fearful of losing my home. 94% 95%
Decline to answer 1% 1%
N=176 N=595

State of the Economy

Employees and retirees were asked about their thoughts on the current state of the economy. Nearly half of retirees (48%) and employees (50%) fear we are heading in the direction of a recession. Furthermore, at least one in five retirees (24%) and employees (21%) think we are currently in a recession.

Table 19
“How do you feel about the current state of the economy?”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Current state of the economy 4 Qtr 2007
Retiree EE
I think we are in a recession. 24% 21%
I do not think we are in a recession, but I fear we are heading in that direction. 48% 50%
I do not think we are close to a recession. 14% 13%
Not sure 14% 16%

Retirees and employees were asked what they would likely do if they had to reduce their spending due to an economic slow down. The most frequently selected actions, for both retirees and employees, included eating fewer meals at restaurants (49% of retirees and 76% of employees), spending less on clothing or other consumer goods (49% of retirees and 69% of employees), and cutting back on entertainment, such as going to movies, concerts or other events (39% of retirees and 63% of employees). Significantly more retirees (27%) than employees (9%) indicated they would not take any of these actions in the event of an economic slow down.

Table 20
“If you had to reduce your spending due to an economic slow down, which of the following would you be likely to do?”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Reduce your spending 4 Qtr 2007
Retiree EE
Eat fewer meals at restaurants 49%sig 76%
Spend less on clothing or other consumer goods 49%sig 69%
Cut back on entertainment, such as going to movies, concerts or other events 39%sig 63%
Save gas money by driving my car less, car pooling or using public transportation 38% 36%
Purchase take out coffee less frequently 10%sig 27%
Lower my retirement plan contribution rate 1%sig 11%
Not pay my credit card bill for at least a month 1%sig 4%
Not pay my mortgage for at least a month 1% 2%
None of these 27%sig 9%

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

When asked how the current economy has impacted their overall spending in the past two months, over half of retirees (60%) and employees (54%) said their spending has remained about the same. Approximately a third of retirees (32%) and slightly more employees (38%) have reduced their overall spending to some degree. When compared to 1st quarter of 2007, employees spending patterns have remained unchanged, while significantly fewer retirees indicate they have greatly reduced their overall spending.

Table 21
“Which of the following best describes how the current economy has impacted your overall spending in the past two months?”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Impact of current economy 4 Qtr 2007 4 Qtr 2006 4 Qtr 2004
Retiree EE Retiree EE EE
I have greatly increased my overall spending 2% 2% 1% 2% 4%
I have increased my overall spending a little 6% 6%SIG 6% 10% 26%
My overall spending is about the same 60%* 54% 53% 50% 26%
I have reduced my overall spending a little 22% 27% 24% 27% 31%
I have greatly reduced my overall spending 10%* 11% 17% 12% 13%
  N=514 N=1,154 N=536 N=1,181 N=1,235

sig = varies significantly (95% level) from retiree and employee comparison
SIG = varies significantly (95% level) from 1 Qtr 2007 employee comparison
"*" = varies significantly (95% level) from 1 Qtr 2007 retiree comparison

Investment Changes

Changing market conditions can spur some individuals to make changes to their investments. To measure what type of changes are being made, employees and retirees were asked to identify if and how they are moving their retirement savings. Based upon their responses, 79% of employees who have retirement savings are not making changes to how their investments are invested while 21% are - 15% to stable and 6% to volatile.

Table 22
“Given the current stock market and economic conditions, have you made changes in how you have your retirement savings invested?”
Base: Those with retirement savings

Retirement savings invested 4 Qtr 2007 4 Qtr 2005 4 Qtr 2004
Retiree EE
Yes, I moved from more volatile to more stable investments 18% 15% 15% 21%
Yes, I moved from more stable to more volatile investments. 3% 6%SIG 9% 10%
No, I have not made any changes 79% 79% 77% 69%
  N=401 N=953 N=1,007 N=1,490

SIG=varies significantly (95% level) from 2005 employee comparison

Future of Social Security

Nearly half of employees (49%) and a third of retirees are either very or extremely concerned about the future of Social Security. Significantly more employees than retirees are extremely concerned about the future of Social Security.

Table 23
“To what degree are you concerned about the future of Social Security?”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Concerned about Social Security 4 Qtr 2007 3 Qtr 2005 1 Qtr 2005
Retiree EE EE EE
Not at all concerned 11% 7% 6% 5%
Somewhat concerned 32%sig 19%SIG 24% 24%
Concerned 24% 25%SIG 21% 22%
Very concerned 21% 27%SIG 22% 21%
Extremely concerned 12%sig 22%SIG 26% 28%
  N=514 N=1,154 N=1,147 N=1,101

sig = varies significantly (95% level) from retiree and employee comparison
SIG = varies significantly (95% level) from 2005 employee comparison

Employees and retirees were asked how they would manage if Social Security fails (or has failed) to provide the level of retirement income they have been expecting. Employees believe their most likely means of managing are to remain in the workforce longer (40%) and to phase into retirement (26%).

Nearly half (49%) of retirees said the system has not failed to provide their expected level of retirement income. Of those retirees who have had to manage with lower than expected levels of retirement income from Social Security, the most common management method was a lowered standard of living (22%).

Table 24
“If the Social Security system fails/has failed to provide you with the level of retirement income you've been expecting, which of the following best describes how you would manage/are managing?”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Social Security system 4 Qtr 2007 3 Qtr 2005 1 Qtr 2005
Retiree EE EE EE
Remain/remained in workforce longer (postpone/postponed retirement) 4%sig 40% 43% 36%
Phase/phased into retirement (work/worked part-time) 6%sig 26% 25% 32%
Start saving more retirement now N/A 18%SIG 22% 18%
Lower/lowered standard of living in retirement 22%sig 10%SIG 7% 9%
Other 18%sig 6%SIG 3% 5%
System has not failed to provide expected level of retirement income 49% N/A N/A N/A
  N=514 N=1,154 N=1,147 N=1,101

sig = varies significantly (95% level) from retiree and employee comparison
SIG = varies significantly (95% level) from 2005 employee comparison

Half of employees expect 25% or less of their retirement income to come from Social Security. Another quarter or so (27%) of the employees expect 26% to 50% of their retirement income to come from Social Security. Only 2% of employees expect 100% of their retirement income to come from Social Security.

Just under a third of retirees (31%) say 25% or less of their retirement income comes from Social Security. Over a quarter (27%) say 26 to 50% of their income in retirement is funded by Social Security. While only 2% of employees expect all of their retirement income to come from Social Security, 11% of retirees say they currently get all of their retirement income from Social Security.

Table 22
“What percent of future/current retirement income do you plan to come/comes from Social Security?”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Social Security income 4 Qtr 2007 1 Qtr 2005
Retiree EE EE
25% or less 31%sig 50% 51%
26 to 50% 27% 27% 26%
51 to 75% 15% 16% 16%
76 to 99% 8% 6%SIG 4%
100% 11%sig 2% 3%
Decline to answer 8% 0% 0%
  N=514 N=1,154 N=1,101

sig = varies significantly (95% level) from retiree and employee comparison
SIG = varies significantly (95% level) from 2005 employee comparison

Social Security Benefit Collection

Employees and retirees were asked when they plan to begin (began) collecting Social Security benefits – either prior to or after reaching their Full Retirement Age. Most employees (61%) plan to collect their Social Security benefits after reaching their Full Retirement Age. In contrast, the majority of retirees (67%) began collecting Social Security benefits prior to reaching their Full Retirement Age.

Table 26
“Full Retirement Age is when recipients are eligible to receive full Social Security benefits, and it typically ranges between 65 to 67 years of age, depending on the year you were born. When do you plan/did you begin to collect/collecting Social Security benefits?”
Base: 1,154 employed U.S. adults in firms of 10-1,000 employees and 514 retirees

Collect Social Security benefits 4 Qtr 2007
Retiree EE
I plan to collect/collected Social Security benefits prior to reaching my Full Retirement Age. 67%sig 14%
I plan to collect/collected Social Security benefits after reaching my Full Retirement Age. 18%sig 61%
Not sure N/A 24%
I have not yet collected Social Security benefits 15% N/A

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

Employees who know when they plan to collect Social Security benefits and retirees who have already collected benefits were asked if they plan to (or already have) continue to work after they begin collecting Social Security benefits. Many of the retirees (62%) have not continued to work. Thirty percent of the retirees have worked part-time since they began collecting Social Security benefits, while only 8% have worked full-time.

Unlike retirees, the majority of employees (74%) plan to work at least part-time after they begin collecting Social Security benefits. Only a quarter or so (26%) of employees do not plan to work at all after collecting Social Security benefits.

Table 27
“Do you plan to continue working/did you continue working, even part-time, after you begin/began collecting Social Security benefits?”
Base: Employees who know when they plan to collect Social Security benefits and retirees who have already collected Social Security benefits

Continue working 4 Qtr 2007
Retiree EE
Yes, I plan/have worked full-time 8%sig 20%
Yes, I plan/have worked part-time 30%sig 54%
No, I do not plan/have not continued working. 62%sig 26%
N=423 N=865

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

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