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The Principal Financial Well-Being IndexSM Employee and Retiree Comparison Questions - First Quarter 2008

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. According to Table 1, 67% of employees agree somewhat or completely that they are very concerned about their long-term financial future, while 33% of employees somewhat or completely agree that they are extremely happy with their current financial well being.

Male employees (37%) are more likely to agree that they are extremely happy about their current financial well being than female employees (27%).

Significantly fewer retirees (49%) than employees (67%) are very concerned about their long-term financial future, and significantly more retirees (46%) than employees (33%) 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: 1,316 employed U.S. adults in firms of 10-1,000 employees and 589 retirees

(% of respondents agreeing completely or somewhat) 1 Qtr 2008 1 Qtr 2007 1 Qtr 2006 1 Qtr 2005 1 Qtr 2004
Retiree EE Retiree EE EE EE EE
I am very concerned about my long-term financial future. 49%sig 67%SIG 53% 73% 73% 75% 76%
I am extremely happy about my current financial well-being. 46%sig 33%SIG 44% 29% 27% 27% 34%
I have not yet planned for retirement savings/security. N/A 26% N/A 24% 30% 28% 26%

SIG=Significant at the 95% confidence level from previous results employee comparison
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 2007, 83% expect to receive a refund. There has been no significant change since 1st quarter of 2007. Significantly fewer retirees (46%) than employees (83%) expect to receive a tax refund this year.

When asked what they plan to do with the refund, significantly more employees (45%) than retirees (16%) plan to pay down or pay off short-term debts. Four in ten retirees and employees plan to save or invest their refund.

Table 2
“Do you expect to receive a federal or state tax refund for 2007?”
Base: 1,316 employed U.S. adults in firms of 10-1,000 employees and 589 retirees who have a feeling for whether or not they will receive a federal or state tax refund for 2007.

Tax Refund 1 Qtr 2008 1 Qtr 2007 1 Qtr 2006
Retiree EE Retiree EE EE
Yes 46%sig 83% 40% 83% 84%
No 54%sig 17% 60% 17% 16%
N=481 N=1,138 N=425 N=1,031 N=1,145

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

Table 3
“What do you plan to do with your tax refund? Please select all that apply.”
Base: 932 employed U.S. adults in firms of 10-1,000 employees and 216 retirees who expect to receive a refund.

Tax Refund 1 Qtr 2008 1 Qtr 2007 1 Qtr 2006
Retiree EE Retiree EE EE
Pay down or pay off short-term debts 16%sig 45% 15% 44% 44%
Save or invest the refund 40% 40% 43% 41% 38%
Pay down or pay off longer-term debts 10%sig 22%SIG 7% 14% 17%
Spend on consumer products-clothing, electronics, etc. 6% 13% 5% 12% 16%
Spend on a big ticket item 2% 6% 2% 5% 7%
Other 13% 9% 10% 11% 10%
Not Sure 21%sig 7% 24% 8% 8%
N=216 N=932 N=193 N=814 N=945

SIG=Significant at the 95% confidence level from previous results employee comparison
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 (29%) was that they don't seek advice from other individuals. The largest portion of employees (30%) said they would go first to family or friends. When combining the responses for third party professionals, 52% 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 4.

Female employees (35%) are significantly more likely to go to family or friends for financial advice than male employees (26%), while male employees (12%) are significantly more likely than female employees (7%) to use the internet. Furthermore, 18 - 34 year-old employees (45%) are significantly more likely to go to friends or family for financial advice than 35 - 44 year-old employees (30%), 45 - 54 year-old employees (24%), and those employees 55 years and older (12%).

Table 4
“To whom would you normally go first for financial advice?”
Base: 1,316 employed U.S. adults in firms of 10-1,000 employees and 589 retirees.

Financial Advice 1 Qtr 2008 1 Qtr 2007 2 Qtr 2006
Retiree EE Retiree EE Retiree EE
Family or friends 13%sig 30% 11% 29% 11% 35%
Certified financial planner 18% 14% 18% 13% 16% 14%
Bank or financial institution 13%sig 8% 11% 10% 9% 10%
Accountant 6% 7% 7% 7% 5% 7%
Internet 3%sig 10% 2% 10% 2% 10%
Benefit provider or financial services company 7%^ 4% 3% 5% 4% 5%
Stock Broker 5% 3% 3% 2% 5% 2%
Insurance agent or broker 1% 1% <1% 1% 1% <1%
Attorney 2% <1% 1%^ <1% 3% 1%
Employer - 2% - 1% N/A 1%
News Media (e.g. magazines, newspapers, radio, TV) 1% 1% 2% 2% 1% 2%
Other 3% 2% 3% 1% 3% 3%
Don't seek advice from other individuals 29%sig^ 18% 38% 18% 40% 13%
N=589 N=1,316 N=536 N=1,181 N=638 N=1,100

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

Managing Money in Retirement

Employees and retirees were asked how they are managing, or plan to manage, their money in retirement. The majority of retirees (63%) are managing their retirement money on their own. Employees are less likely than retirees to manage their money on their own in retirement, as significantly fewer employees (41%) plan to manage their own money in retirement. Forty-one percent of employees either have an advisor already (24%) or plan to seek out an advisor in the future (17%).

Table 5
“Which of the following best describes how you manage (are planning to manage) your money in retirement?”
Base: 1,316 employed U.S. adults in firms of 10-1,000 employees and 589 retirees.

Managing Money 1 Qtr 2008
Retiree EE
I manage (will manage) it on my own 63%sig 41%
I have an advisor and I manage (will manage) with the guidance from my advisor 16% 17%
I plan to seek out an advisor to assist with managing my money 3%sig 17%
I have an advisor and my advisor manages (will manage) for me 16%sig 7%
I plan to seek out and advisor to manage my money 3% 2%
Not sure 0%sig 16%

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

When asked what criteria is most important in evaluating fund options for their retirement plan, the most important criteria for both employees (53%) and retirees (26%) was investment performance. Over a third of retirees (36%) and significantly fewer employees (27%) indicated they do not make individual investment selections.

Table 6
“In evaluating fund options for your retirement plan, which of the following is the most important criteria you use to make the investment selection?”
Base: 1,316 employed U.S. adults in firms of 10-1,000 employees and 589 retirees.

Important Criteria 1 Qtr 2008
Retiree EE
Investment performance 26%sig 53%
Investment fees 3% 5%
Investment manager reputation 12%sig 4%
Brand name of company 6%sig 3%
Other 4% 4%
None of these 13%sig 4%
I don't make individual investment selections 36%sig 27%

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

Managing Investments

Employees and retirees were asked to identify how they prefer to make investment decisions. Half of employees and significantly fewer retirees (43%) prefer to select investment funds/accounts on their own. Retirees (35%) are less likely than employees (43%) to prefer to have someone manage their investments for them.

Additionally, those respondents who noted they prefer to have someone manage their investments were also asked if they preferred target date funds handled by a fund manager, target risk funds handled by a fund manager or fee-based financial advisors acting on their behalf. Thirty-seven percent of employees and a third of retirees preferred target risk funds handled by a fund manager. Retirees (49%) were significantly more likely to prefer fee-based financial advisors acting on their behalf. Compared to first quarter 2007, more employees (24% versus 19%) prefer a lifecycle/target date fund. See Table 8 for details.

Table 7
“Which of the following statements best describes how you prefer to make investment choices?”
Base: 1,316 employed U.S. adults in firms of 10-1,000 employees and 589 retirees.

Investment Choices 1 Qtr 2008 2 Qtr 2007 4 Qtr 2006
Retiree EE EE EE
I prefer to select investment funds/accounts on my own. 43%sig 50% 50% 54%
I prefer to have someone manage my investments for me. 35%sig 43% 41% 35%
Other 23%sig 6% 9% 11%
N=589 N=1,316 N=1,137 N=1,197

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

Table 8
“Which of the following approaches would you select if you had someone manage your investments for you?”
Base: 576 employed U.S. employees and 243 retirees (based on those who prefer to have someone manage his/her assets).

Managed Investment Choices 1 Qtr 2008 2 Qtr 2007 4 Qtr 2006
Retiree EE EE EE
Select lifecycle/target risk funds that are handled by a fund manager based upon my preferred level of risk (e.g., aggressive, moderate or conservative). 33% 37%SIG 46% 44%
Select professionally managed accounts - fee-based financial advisor making investment choices on my behalf. 49%sig 26% 27% 24%
Select lifecycle/target date funds that are handled by a fund manager based upon my estimated retirement year. 4%sig 24%SIG 19% 23%
None of these 14% 14%SIG 8% 9%
N=243 N=576 N=489 N=445

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

Politics

Respondents were asked a series of questions regarding the upcoming 2008 presidential election. They were asked to select the candidate (from a list of potential candidates) they believed would:

  • Help improve their and their family's financial well being;
  • Create the most jobs for the country;
  • And be best at ensuring availability of affordable health care to all Americans.

Because survey responses were collected when the pool of candidates was larger, contenders that have since withdrawn from the race have been aggregated within the "Other Democratic Candidate" and "Other Republican Candidate" categories.

In regards to improving employees' (and their family's) financial well-being, Hillary Clinton (17%) and Barack Obama (16%) are in a tight race. Among retirees, Hillary Clinton (22%) was selected as the candidate that would best improve their and their family's financial well-being; Barack Obama (11%) was the next most selected candidate by retirees. It is important to note that at least a quarter of both retirees (25%) and employees (29%) are undecided at this time. Please see Table 9 for details.

In terms of job creation for the country, Hillary Clinton (17%) and Barack Obama (17%) were equally selected by employees. For retirees, Hillary Clinton (22%) was the top candidate for job creation, with John McCain (10%) coming in second. Once again, at least a quarter of both retirees (28%) and employees (33%) are undecided on which candidate would create the most jobs for the country. Please see Table 10 for additional information.

Among retirees, Hillary Clinton (34%) was the most commonly selected candidate for ensuring the availability of affordable health care to all Americans. Barack Obama (10%) was the next most commonly selected candidate for retirees. Employees' top selections for ensuring the availability of affordable health care for all Americans was Hillary Clinton (26%) and Barack Obama (18%). Many retirees (25%) and employees (32%) remain undecided. Please see Table 11 for further details.

Table 9
“Which of the following presidential candidates do you believe would best help improve your and your family's financial well-being?”
Base: 1,316 employed U.S. adults in firms of 10-1,000 employees and 589 retirees.

Best Help 1 Qtr 2008
Retiree EE
Hillary Clinton 22% 17%
Barack Obama 11% 16%
John McCain 9% 8%
Mike Huckabee 4% 7%
Other Democratic Candidate 9% 4%
Other Republican Candidate 17% 17%
Other Candidate - Unspecified Party 3% 2%
Undecided 25% 29%

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

Table 10
“Which of the following presidential candidates do you believe would create the most jobs for the country?”
Base: 1,316 employed U.S. adults in firms of 10-1,000 employees and 589 retirees.

Create Jobs 1 Qtr 2008
Retiree EE
Hillary Clinton 22%sig 17%
Barack Obama 9%sig 17%
John McCain 10% 6%
Mike Huckabee 2% 5%
Other Democratic Candidate 9% 4%
Other Republican Candidate 18% 16%
Other Candidate - Unspecified Party 2% 2%
Undecided 28% 33%

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

Table 11
“Which of the following presidential candidates do you believe would be the best at ensuring availability of affordable health care to all Americans?”
Base: 1,316 employed U.S. adults in firms of 10-1,000 employees and 589 retirees.

Health Care 1 Qtr 2008
Retiree EE
Hillary Clinton 34%sig 26%
Barack Obama 10%sig 18%
John McCain 6% 5%
Mike Huckabee 2% 3%
Other Democratic Candidate 9% 4%
Other Republican Candidate 13% 10%
Other Candidate - Unspecified Party 2% 2%
Undecided 25%sig 32%

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

State of the Economy

Employees and retirees were asked about their thoughts on the current state of the economy. Four out of ten retirees (41%) and employees (42%) think we are currently in a recession. These are significant increases from 4th quarter of 2007 when only 24% of retirees and 21% of employees believed we were in a recession. Furthermore, nearly half of retirees (45%) and employees (46%) fear we are heading in the direction of a recession.

Table 12
“How do you feel about the current state of the economy?”
Base: 1,316 employed U.S. adults in firms of 10-1,000 employees and 589 retirees.

Economy 1 Qtr 2008 1 Qtr 2007
Retiree EE Retiree EE
I think we are in a recession. 41%^ 42%SIG 24% 21%
I do not think we are in a recession, but I fear we are heading in that direction. 45% 46%SIG 48% 50%
I do not think we are close to a recession. 10%sig^ 6%SIG 14% 13%
Not sure 5%^ 6%SIG 14% 16%

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

Respondents who do not believe the U.S. is currently in a recession were asked how likely it is that the nation will go into an economic recession some time in 2008. Fifty-nine percent of employees and 44% of retirees believe it is either somewhat likely or very likely that the nation will go into a recession some time this year.

All respondents were asked if they believe the Democratic Party or the Republican Party is best prepared to address the economy and help improve Americans' financial well being if there is a recession in 2008. At least a third of both retirees (39%) and employees (33%) believe the Democratic Party is best prepared to deal with the economy in the event of an economic recession. Just about a quarter of both retirees (26%) and employees (24%) believe the Republican Party is better suited to deal with the economy if a recession were to occur. Another quarter or so of retirees (23%) and employees (24%) said neither party. See Table 14 for details.

Female employees (38%) were significantly more likely than male employees (29%) to believe the Democratic Party is best prepared to address the economy in the event of a recession, while male employees (32%) were significantly more likely than female employees (13%) to think the Republican Party is better prepared.

Table 13
“In your opinion, how likely is it that the nation will go into an economic recession some time in 2008?”
Base: 798 employed U.S. adults in firms of 10-1,000 employees and 384 retirees who think the U.S. is not in a recession, is close to a recession, or were not sure.

Economy 1 Qtr 2008
Retiree EE
Very unlikely 9%sig 2%
Somewhat unlikely 18% 15%
Neither likely nor unlikely 29% 23%
Somewhat likely 39%sig 49%
Very likely 5% 10%

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

Table 14
“If there is a recession in 2008, do you believe the Democratic Party or the Republican Party is best prepared to address the economy and help improve Americans' financial well-being?”
Base: 1,316 employed U.S. adults in firms of 10-1,000 employees and 589 retirees.

Economy 1 Qtr 2008
Retiree EE
Democratic Party 39% 33%
Republican Party 26% 24%
Neither Party 23% 24%
Not sure 13%sig 19%

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

Also of interest was if respondents felt their financial well being is currently better, worse, or the same as when President Bush went into office in 2001. Over a third of employees (38%) and almost half of retirees (48%) believe their current financial well-being is worse now than it was when President Bush went into office. Another third or so of the employees (35%) and 40% of retirees believe their financial well-being is about the same now. Only 12% of retirees and 26% of employees believe their financial well-being is better now.

Table 15
“Do you think your current financial well-being is about the same, better, or worse than it was when President Bush took office in 2001?”
Base: 1,316 employed U.S. adults in firms of 10-1,000 employees and 589 retirees.

Financial 1 Qtr 2008
Retiree EE
Financial well-being is worse 48%sig 38%
Financial well-being is same 40% 35%
Financial well-being is better 12%sig 26%

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

Relationship between Financial Health and Physical Health

Respondents were asked to rate their financial health on a scale from 1 to 10 with 1 being very unhealthy and 10 being very healthy. Respondents who rated their financial health as an 8, 9, or 10 were classified as "Financially Healthy." Those who rated their financial health as a 4, 5, 6, or 7 were classified as "Neither Financially Healthy nor Unhealthy." Finally, those who rated their financial health as a 1, 2, or 3 were classified as "Financially Unhealthy." Respondents were also asked to rate their physical health using the same scale and the aforementioned classification criteria was applied to physical health also.

Significantly more retirees (37%) rated their financial health as healthy compared to employees (27%). In contrast, significantly more employees (54%) rated their physical health as healthy compared to retirees (43%).

Of the employees (n = 340) classified as "Financially Healthy", 81% indicated they were "Physically Healthy". Only 1% of employees who were "Financially Healthy" said they were "Physically Unhealthy."

The same pattern was observed for retirees, but to a lesser extent. Of the retirees (n = 230) classified as "Financially Healthy", 68% reported themselves as "Physically Healthy". Only 2% of retirees who were "Financially Healthy" said they were "Physically Unhealthy."

Thus, there appears to be a positive relationship between self-reported financial health and self-reported physical health among both employees and retirees.

Table 16
“Please rate your overall financial health at this time.”
Base: 1,316 employed U.S. adults in firms of 10-1,000 employees and 589 retirees.

Financial Health 1 Qtr 2008
Retiree EE
Financially Healthy
(8, 9, or 10 on 10 pt. scale)
37%sig 27%
Neither Financially Healthy nor Unhealthy
(4, 5, 6, or 7 on 10 pt. scale)
51% 62%
Financially Unhealthy
(1, 2, or 3 on 10 pt. scale)
13% 10%

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

Table 17
“Please rate your overall physical health at this time.”
Base: 1,316 employed U.S. adults in firms of 10-1,000 employees and 589 retirees.

Physical Health 1 Qtr 2008
Retiree EE
Physically Healthy
(8, 9, or 10 on 10 pt. scale)
43%sig 54%
Neither Physically Healthy nor Unhealthy
(4, 5, 6, or 7 on 10 pt. scale)
47% 43%
Physically Unhealthy
(1, 2, or 3 on 10 pt. scale)
10%sig 3%

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

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