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The Principal Financial Well-Being IndexSM Index Summary - Third 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 July 31st to August 11th, 2008 among 1,331 employees and 726 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.

Download the Full Report (PDF: 283 KB) - includes all questions and data

Featured Key Findings

  • Financial Well Being - A total of 71% of employees are concerned about their long-term financial future, while only 59% of retirees share this concern. Specific financial concerns in retirement differ for employees and retirees. When asked to identify the one issue that keeps them awake at night, the issue of most concern to employees is being able to afford/pay for the basic necessities (35%). When having to select only one issue, outliving my savings (22%) and the rising cost of inflation reducing purchasing power (22%) were equally selected by retirees.
  • State of Retirement - Retirees were significantly more confident than the employee group that they will have enough money to take care of their basic necessities in retirement (80% retirees, 58% employees), will have a retirement as affluent as their parents (73% retirees, 53% employees), will not have to worry about financial matters during retirement (61% retirees, 42% employees), and will be able to maintain their pre-retirement standard of living in retirement (61% retirees, 45% employees).
  • Economy
    • Employees and retirees were asked how they would reduce their spending due to an economic slow down. The top methods selected by employees were eating fewer meals at restaurants (81%),spending less on clothing and other consumer items (75%), and cutting back on entertainment (75%). Nearly six out of ten employees (59%) also said they would try to save gas money. Retirees’ most common methods for reducing spending due to an economic slow down included eating fewer meals at restaurants (68%), spending less on clothing and other consumer goods (68%), and saving gas money by driving less, car pooling or using public transportation (68%).
    • Just over six out of ten retirees (61%) and employees (61%) have reduced their overall spending to some degree in the past two months due to the economy. Significantly more employees and retirees have reduced their overall spending compared to 2nd quarter of 2008.
  • Rising Fuel Costs
    • To compensate for rising fuel costs, over six out of ten employees (61%) and nearly three quarters of retirees (74%) indicate they are driving less – these are both significant increases from 2nd quarter of 2008. Over four out of ten employees (43% - a significant increase from last quarter) and nearly a third of retirees (31%) also reported they have reduced their spending on basic necessities. Significantly more employees this quarter than last quarter reported they have fallen behind on their monthly bills due to rising fuel costs (12% versus 7% last quarter).
    • Of a list of possible employer offered benefits to help offset rising fuel prices, employees (12%) are most likely to be taking advantage of a flexible work schedule. Over three quarters of employees (76%) indicated their employer has not offered any benefits to help with fuel prices.
  • Rising Grocery Prices - Six out of ten (62%) employees and nearly half of retirees (49%) indicate they are going out to eat less to offset increases in grocery prices. Approximately six out of ten of both retirees (61%) and employees (57%) are purchasing store or generic brands and half of employees (51%) and 42% of retirees are clipping coupons more. Over a third of both retirees (37%) and employees (40%) are sacrificing convenience and premium items for lower cost alternatives. Furthermore, over a third of retirees (41%) and employees (36%) are shopping at multiple stores to take advantage of current sales.
  • Emergency Fund - Approximately seven out of 10 retirees (67%) and half of employees have an emergency fund of money they can immediately access if necessary. This is a significant decline from the number of employees (58%) who indicated they have an emergency fund in second quarter of 2008. Over half of retirees (52%) said they could cover over 6 months of living expenses with their emergency fund, compared to only 23% of employees. Most employees said they could cover one to two months of living expenses (29%) or three to four months of living expenses (30%) with their emergency fund.
  • Election Issues and Confidence in Candidates – Of a list of possible issues, economy/jobs was the issue of most concern to employees (79%). Significantly more employees are currently concerned with the economy/jobs (79% versus 52% last year) than in 3rd quarter of 2007. Only about a third (35%) of employees has confidence that one or more of the presidential candidates can effectively deal with the economy/jobs. Retirees’ issues of top concern include healthcare (72%), Social Security (72%), and the economy/jobs (70%).

Employees Only

  • Benefit Availability and Enhancement – The most commonly offered benefits by small to medium sized employers include health insurance (95%), dental insurance (74%), defined contribution plans (72%), life insurance (67%), free parking (59%) and disability insurance (43%). Defined benefit plans (20%), profit sharing/bonus (15%), and flex time (13%) were the benefits that employees would most like to see added to their employer offered benefit package. Health insurance (44%) and defined contribution plans (18 %) top the list of benefits that employees most wish their company would improve upon.
  • Benefit Satisfaction and Importance – Employees are most satisfied (rating of 8, 9 or 10 on a 10 point scale) with their defined benefit plan (61%), stock options (61%), defined contribution plan (56%), life insurance (54%) and disability insurance (51%). Health insurance topped the list with 9 out of 10 employees rating this as at least an “8” in terms of importance.
  • 401(k) Changes - Employees participating in their employer’s defined contribution plan (81%) were asked what changes they have made, if any, to their 401(k) account in the past 6 months due to current economic conditions.
    • Thirteen percent indicated they have made some type of change to their 401(k) – 5% have decreased the amount they are contributing to their 401(k), 4% have taken out a loan from their 401(k) account, 3% have taken out a hardship withdrawal, and 3% have stopped contributing to their 401(k) account (note percentages exceed 13% due to some employees making multiple changes).
    • Employees who have made changes to their 401(k) account have made these changes most commonly to pay down debt (40%), to pay daily expenses (38%), or to pay medical expenses (20%).

Retirees Only

  • Retirement Income Planning - Just about a third (32%) of retirees said they began to think about managing their spending and investments in retirement more than 10 years prior to their retirement. Retirees were asked when they would have started learning more about spending and investing in retirement if they could do it over again. While only 32% of retirees said they actually did this learning more than 10 years prior to retirement, 71% said they would do it more than 10 years prior to retirement if they could do it over again. Surprisingly, over one out of five retirees (22%) did not start thinking seriously about how to manage their spending and investments in retirement until they were retiring. 

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