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The Principal Financial Well-Being IndexSM Executive Summary - Second Quarter 2007

The Principal Financial Group® commissioned Harris Interactive® to conduct online research with employees (ages 18+) of small and mid-sized (SMB) U.S. businesses (firm size 10 - 1,000 employees) about their attitudes and perceptions regarding their financial well being and their current employee benefits. To compare responses, Harris Interactive also interviewed a group of retirees. Harris Interactive conducted The Principal Financial Well-Being Index survey of 1137 employees and 548 retirees from May 1, through May 7, 2007 using the Harris Poll Online. Data were weighted to be representative of the entire population of adult employees working for small to midsized U.S. businesses and retirees on the basis of age by gender, age, education, race/ethnicity, region, income and propensity to be online. With a probability sample of this size, one can say with 95% certainty that the results have a statistical precision of ± 2.9 percentage points for employees and ± 4.2 percentage points for retirees; however, this was not a probability sample. This is one in a series of quarterly studies to identify and track changes in the workplace of small and mid-sized (growing) businesses. The first Principal Financial Well-Being IndexSM survey was conducted in the United States in 2000.

Key Findings

Employee and Retiree Comparisons

  • Rising Fuel Costs – Employees and retirees were asked if the rising cost of fuel had influenced various activities in their lives. Nearly three out of ten employees and retirees say it is influencing 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.
  • Summer vacation plans—While rising fuel costs may not have influenced vacation planning yet, there is a fear that it might. 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%). Almost half of the employees (47%) also fear that not having enough money saved for vacation could impact their plans. Almost four in ten employees fear they may be too busy at work which could impact their summer vacation plans.
  • Check-Ups—Employees and retirees were given a list of items that people have periodic check-ups. Four in ten retirees and employees say they have never had a financial planning check-up. On the other hand, half of the employees and one third of the retirees have their car checked four times or more per year.
  • 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.
  • 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.
  • Retiree Healthcare Benefits - Retirees (53%) are significantly more likely than employees (22%) to have worked 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.
  • Financial Hardship—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.
  • Years in Retirement—Retirees plan to spend significantly more years in retirement (24.6 average) than employees (21.4 average).
  • Financial Analysis of Coverage—Two out of three retirees and employees responded they have not had a financial analysis done 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. The most often mentioned item having been reviewed in the past three years was retirement savings. One fourth of the employees and retirees listed retirement savings as an item that has been reviewed for adequacy within the past three years.

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Employees Only

  • Benefit Importance – Consistently, for the past six years, the largest percentage of employees have rated health insurance and defined contribution plans a 8,9 or 10 on a 10 point scale with 10 being “Very Important”.
  • Benefit Satisfaction—Employees are most satisfied with their Defined Benefit Plan, Defined Contribution Plan and Life Insurance.
  • Long-Term Financial Future—For the past three years, job security had been the item that topped the importance chart when compared to long-term financial future and challenging work. This is the first time since the fourth quarter of 2004 that long-term financial future has overtaken job security for the top spot.
  • Job Security—Employees were asked about their level of concern with their own job security. Just under half (47%) said they were not at all concerned. A follow up question was asked to see if feelings of job security are causing employees to make changes in their future career. One in five (22%) said yes.
  • Health Savings Accounts—Significantly more employees have heard of Health Savings Accounts since last year. While 83% of the employees who have heard of a Health Savings Account are currently not enrolled in one, six percent say they are somewhat or very likely to consider enrolling within the next 12 months.
  • Roth 401(k) and 403(b) plans—Almost two-thirds of employees have heard of these plans and 13% of the employees say their company is currently offering them. Fifty-two percent of the employees whose company offers the Roth 401(k) or 403(b) are participating in such plans.

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