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The Principal Financial Well-Being IndexSM Index Summary - Second Quarter 2008

This Principal Financial Well-Being IndexSM survey was conducted online within the United States by Harris Interactive on behalf of the Principal Financial Group® between April 30 to May 7, 2008 among 1,117 employees and 673 retirees. 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.

Employees consisted of adults 18+ who work at small and mid-sized (SMB) U.S. businesses (firm size 10-1,000 employees). Retirees consisted of adults age 60+ who reported they are retired or those who are employed part-time or self-employed and have retired from a previous career. Results were weighted as needed for age by gender, education, race/ethnicity, education, region and household income. Propensity score weighting was also used to adjust for respondents’ propensity to be online.

All sample surveys and polls, whether or not they use probability sampling, are subject to multiple sources of error which are most often not possible to quantify or estimate, including sampling error, coverage error, error associated with nonresponse, error associated with question wording and response options, and post-survey weighting and adjustments. Therefore, Harris Interactive avoids the words “margin of error” as they are misleading. All that can be calculated are different possible sampling errors with different probabilities for pure, unweighted, random samples with 100% response rates. These are only theoretical because no published polls come close to this ideal.

Respondents for this survey were selected from among those who have agreed to participate in Harris Interactive surveys. The data have been weighted to reflect the composition of the entire population of adult employees working for small to mid-sized U.S. businesses and retirees. Because the sample is based on those who agreed to be invited to participate in the Harris Interactive online research panel, no estimates of theoretical sampling error can be calculated.

Key Findings

Employee and Retiree Comparisons

  • State of the Economy:
    • Six out of ten retirees and nearly as many employees (58%) think we are currently in a recession. These are significant increases from 1st quarter of 2008 when only 41% of retirees and 42% of employees believed we were in a recession. Furthermore, a third of employees (34%) and 29% of retirees fear we are heading in the direction of a recession.
    • Employees and retirees were asked how they would reduce their spending due to an economic slow down. The top methods selected for both retirees and employees were eating fewer meals at restaurants, spending less on clothing and other consumer items, and cutting back on entertainment. Over half of employees and retirees also indicated they would save gas money by doing things like driving less, car pooling or using public transportation. Note that significantly more retirees and employees selected many of these methods for potentially reducing their spending than when this question was asked last time in 4th quarter of 2007.
    • When asked how the current economy has impacted their overall spending in the past two months, over a third of retirees (36%) and employees (36%) said their spending has remained about the same. Just over half of retirees (55%) and employees (56%) have reduced their overall spending to some degree. Significantly more employees and retirees have reduced their overall spending compared to 4th quarter of 2007.
  • Rising Fuel Costs — For employees, rising fuel costs have affected their automobile purchasing decisions (35%) and holiday vacation plans (35%). Retirees’ holiday vacation plans (33%) and automobile purchasing decisions (20%) have been influenced. To compensate for rising fuel costs, over half of retirees and employees indicate they are driving less. Furthermore, over a quarter of retirees (27%) and a third of employees (36%) reported they have reduced their spending on basic necessities. Nearly four out of ten retirees (38%) and three out of ten employees (29%) said they have not made any financial changes due to rising fuel costs.
  • Rising Grocery Prices - Six out of ten (61%) employees and nearly half of retirees (49%) indicate they are going out to eat less to offset increases in grocery prices. Around half of both retirees (47%) and employees (55%) are purchasing store or generic brands and 44% of both employees and retirees are clipping coupons more. Over a third of both retirees (35%) and employees (37%) are sacrificing convenience and premium items for lower cost alternatives. Furthermore, a third or so of retirees (34%) and employees (36%) are shopping at multiple stores to take advantage of current sales.
  • Summer Vacation Plans — A third of retirees and slightly more employees (37%) have not changed their summer vacation plans given the current state of the economy. Thirty-two percent of employees and 22% of retirees have altered their vacation plans to some extent. Rising fuel prices was selected by just over half of the retirees (56%) and employees (57%) as something they fear could potentially impact their summer vacation plans — these are significant increases from this time last year. Over a third of the employees (35%) and a quarter of retirees (27%) also fear that not having enough money saved for vacation could impact their plans.
  • Economic Stimulus Plan:
    • Retirees and employees were asked how they plan to spend the tax rebate they will receive as part of President Bush’s plan to stimulate the economy. Commonly selected methods by employees are pay down or pay off short-term debts (26%), save or invest the refund (25%), and pay monthly bills (23%). Retirees are most likely planning to save or invest the refund (20%) or pay monthly bills (16%).
    • Respondents were asked if they believed President Bush’s plan to stimulate the economy in the form of tax rebates will be effective at improving the economy. Only 14% of retirees and 19% of employees expressed some level of agreement that President Bush’s plan will be effective at stimulating the economy. In fact, 58% of retirees and 55% of employees disagreed to some extent that this plan will help stimulate the economy.
  • Emergency Fund - Approximately seven out of 10 retirees (69%) and six out of ten employees (58%) have an emergency fund of money they can immediately access if necessary. Over half of retirees (54%) said they could cover over 6 months of living expenses with their emergency fund, compared to only 29% of employees. Most employees said they could cover one to two months of living expenses (25%) or three to four months of living expenses (32%) with their emergency fund.

Other Findings

  • Home Improvements — One quarter of the retirees and just over a third of the employees surveyed are planning to do home improvements this summer — significantly less than last summer. Approximately half of retirees (57%) and employees (49%) will be using money from savings to pay for the home improvements. Credit cards and tax refunds will also be used to finance the home improvements to a larger extent this year over last year by both employees and retirees.
  • 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 (59%) of the employees agree it has been or will be harder to achieve compared to only 41% of the retirees.

View questions and data

Employees Only

  • Benefit Importance — Consistently, for the past five years, the largest percentage of employees have rated health insurance and defined contribution plans an 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 profit sharing/bonus plan.
  • Job Security — Job security was ranked number one in terms of importance by more employees (47%), over long-term financial future (41%) and challenging work (12%). Significantly more employees ranked job security as number one in terms of importance than in 2nd quarter 2007. Just about a quarter (24%) of employees have some level of concern with their own job security. 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 employees (21%) said yes.
  • Concerns about Current Company - Half of employees indicated they have no concerns about the future of their company. The most frequently chosen concern was their company will reduce the number of employees (36%), up significantly from 2nd quarter of 2007 (22%).
  • Health Savings Accounts — Half of retirees and significantly more employees (61%) have heard of a Health Savings Account before. The percentage of employees (61%) who say they have heard of an HSA has decreased significantly since 2nd quarter of 2007(67%).

View questions and data

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