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The Principal Financial Well-Being IndexSM Executive Summary - Third Quarter 2001

Overview:
The Principal Financial Well-Being Index was conducted in October 2001 by Harris Interactive, Inc. This is the fourth in a series of quarterly studies to identify and track trends in the workplace of growing businesses. The first Index was conducted in November of 2000. Harris was commissioned by the Principal Financial Group® to survey employees of growing U.S. businesses (firm size 10 – 1,000 employees) about their attitudes regarding their financial well-being and their employee benefits.

Methodology:
The study was conducted by Harris in cooperation with members of the Harris Poll, which is composed of a random subset of a panel of more than 7 million cooperative respondents via the Internet. More than 1,500 employees of growing companies (size range: 10 – 1,000 employees) were interviewed. Results have been weighted by Harris Interactive to reflect the national small to mid-sized business employee population. This study has a 95 percent confidence level with a range of error of plus 2.5 percent.

Executive Summary
The survey points out some signs of decreased confidence and heightened uncertainty by American workers following the September 11 terrorist attacks and the subsequent weakening economy. In contrast, the results also show that American workers are patiently waiting, and perhaps even demonstrating some measure of patriotism related to their financial well-being and investment behavior.

For example, the respondents were asked how the terrorist attacks and market downturn have affected their long-term retirement investment strategies. Nearly half of the American workers surveyed (45 percent) indicated they have reviewed or plan to review their retirement investment strategies in direct response to the events of September 11 and its impact on the economy and markets. Of the 28 percent of respondents who reviewed their long-term strategies following September 11, the majority (70 percent) said they did not change the amount they are saving; yet 27 percent plan to save more money than prior to September 11.

In a sign of declining confidence in the economy, about three times as many American workers plan to spend less on holiday shopping this year than those who plan to spend more. Nearly one-third of the respondents (31 percent) said they would spend less this holiday season than last year. 59 percent will spend the same as last year and only 10 percent intend to spend more than last year.

At the same time, investors appear to be taking a "wait-and-see" approach to their investment mix, and showing signs of tolerance toward the volatile market. According to the Index, only 21 percent of those surveyed who have retirement savings said they made changes to their retirement investments --moving from volatile to more stable investments in reaction to the downturn. This declined from 28 percent of second quarter respondents who moved to more stable investments.

American workers are less optimistic about retiring early, by age 55, than in previous quarters. Only 3 percent of respondents plan to retire before age 55, down from 9 percent in 4th quarter 2000. Those respondents appear to have migrated to the 60-64 age bracket, with 14 percent of respondents planning to retire then, verses only 8 percent in 4th quarter 2000. The majority of workers (41 percent) plan to retire between ages 65-69, which has remained fairly static over time.

American workers appear to be generally satisfied with their employee benefits. Yet nearly half of respondents (45 percent) wished for healthcare plan improvements (up significantly from 37 percent in the previous quarter), and 16 percent wished for defined contribution retirement plan improvements (down from 18 percent) suggesting that issues like health coverage are becoming increasingly important in today’s environment.

The satisfaction rating of employee benefits has increased slightly during the past three quarters of 2001. Although employees generally understand the importance of retirement savings, 29 percent of the respondents indicated they have not yet begun planning for their own retirement. This is down, however, from 34 percent in the previous Index.

Major Findings

Employee Reaction to Terrorism and Market Volatility

  • In response to the September 11th terrorist attacks and weakened economy, nearly half of the American workers surveyed (45 percent) indicated they have reviewed or plan to review their retirement investment strategies. 28 percent of employees at growing businesses have already reviewed their long-term investment strategy and an additional 17 percent plan to review it.
  • Of the 28 percent of respondents who have reviewed their retirement investment strategy, 70 percent will continue to save the same amount of money in order to achieve their long-term retirement goals, while 27 percent have decided to save more following September 11th.

Employee Spending Plans for the Holiday Season

  • 31 percent of employees of growing businesses intend to spend less this holiday season than last year, while only 10 percent intend to spend more than last year. The majority (59 percent) will spend the same as last year.

Employee Retirement Strategies

  • 21 percent of respondents who indicated that they have retirement savings investments said they have made changes to how their retirement savings are invested (moving from volatile to more stable investments) as a result of the downturn in the stock market this year. This is down from 28 percent in the last quarter.
  • More American workers are planning for retirement since Sept. 11 with only 29 percent of the employees who have not yet planned for retirement or security, down from 34 percent in the previous quarter who had not planned.
  • Overall, employees from growing businesses have not changed their planned retirement age – both men and women still plan to retire at the average age of 64. However, the age of retirement does vary with total household income as the total household income increases from $35,000 to $200,000, the average age of retirement decreases from 65 to 62.
  • Additionally, there was a decrease in the number of respondents who were planning to retire by 55 (only 3 percent, down from 9 percent three quarters ago) and a corresponding increase among those who plan on retiring between 55 and 59 (14 percent, up from 8 percent three quarters ago).

Employee Attitudes toward Benefits

  • Stock market volatility appears to have influenced American workers’ attitudes toward stock options as a benefit. Based on a scale of 1 to 10 with 10 being very important and 1 being not important, the stock option benefit has dropped in its importance rating this quarter from 5.2 to 4.2. The drop in importance rating is also consistent with the drop in employees’ desire to add the stock option benefit, as currently only 3 percent want their company to add it as a benefit.
  • Health insurance was ranked as the most important benefit as well as the benefit employees wish their company would most improve. Defined contribution retirement plans ranked second. 45 percent of the respondents wished for healthcare plan improvements (up significantly from 37 percent in the last quarter) and 16 percent wished for defined contribution retirement plan improvements (down from 18 percent), suggesting that issues like healthcare coverage are becoming increasingly important in today’s environment.
  • Health insurance remains the most common benefit small and mid-size companies offer their employees (86 percent). Defined contribution retirement plans and life insurance tied for second with 67 percent.
  • Employees are most satisfied with their defined benefit retirement plans, with an average rating of 7.3 rating on a scale of 1 to 10 with 10 being very satisfied and 1 being not satisfied at all. This rating has been consistent throughout 2001. Employees gave an average ranking of 6.8 to their defined contribution retirement plans.
  • For a third quarter in a row, defined benefit plans (20 percent) remain the top-ranked additional benefits employees wanted their companies to offer. Profit sharing/bonuses and flextime benefits ranked second, both at 11 percent.
  • 77 percent of the respondents agreed with the statement "having a good benefits plan would keep me working for my current company," a percentage that is consistent with the previous indices.

Employee Financial Future and Well-Being

  • Overall, 25 percent of the respondents agreed with the statement "My company is concerned with my (and my family’s) long-term financial future." 50 percent disagreed that their company was concerned.
  • Similar to last quarter, women are not as happy with their current financial future than men. 57 percent of female respondents disagreed or strongly disagreed with the statement "I am extremely happy with my current financial well-being," as opposed to 44 percent of their male counterparts.
  • When asked to rank the overall importance of the following three things, 46 percent of the respondents ranked job security first, 40 percent ranked long-term financial future first, and 14 percent ranked challenging work first. In last quarter’s Index, an equal number of respondents (44 percent) ranked job security and long-term financial future first. 77 percent of small and mid-sized company employees are "very concerned" about their financial future, down from the previous quarter. Half of employees (50 percent), disagree with the following statement, "I am extremely happy with my financial well-being." The Index has shown a steady decline in the number of employees concerned about their financial future for the past three quarters – 84 percent in first quarter 2001 to 80 percent in second quarter 2001 to the current 77 percent.
  • 65 percent of the respondents continue to think about their financial future at least once a month, consistent with the previous two quarters’ results.

Detail of Major Findings

Employee Attitudes Toward Benefits

1. Employees of growing businesses are being offered a variety of employee benefit programs. Listed is the percentage of businesses currently offering each employee benefit:

3rd Qtr
2001

2nd Qtr
2001

1st Qtr
2001

4th Qtr
2000

Firm Size

10-1,000

10-1,000

11-1,000

10-499

Health Insurance

86%

83%

89%

77%

Defined Contribution Retirement Plans (401(k), etc)

67%

64%

76%

63%

Life Insurance

67%

61%

67%

58%

Free Parking

61%

64%

61%

70%

Disability Insurance

50%

49%

55%

48%

Tuition Reimbursement

31%

31%

42%

25%

Flex Time

29%

28%

33%

25%

Profit Sharing/Bonus

28%

24%

25%

19%

Defined Benefit Retirement

Plans - Pension

24%

25%

32%

33%

Stock Options

12%

15%

15%

14%

Other

6%

7%

10%

6%

None

6%

8%

3%

7%

Child Care Subsidies

2%

2%

8%

4%

On-site Day Care

1%

3%

2%

2%

 

2. The respondents were asked to rate their overall satisfaction with the employee benefits currently being offered. Listed below are average satisfaction levels with these employee benefits (scale of 1 to 10; 10 being very satisfied, 1 being not satisfied at all).

3rd Qtr
2001

2nd Qtr
2001

1st Qtr
2001

4th Qtr
2000

Firm Size

10-1,000

10-1,000

11-1,000

10-499

Defined Benefit Retirement

Plan - Pension

7.3

7.1

7.5

7.6

Life Insurance

6.9

6.8

6.9

6.7

Profit Sharing/Bonus

6.9

6.9

5.7

7.3

Defined Contribution Retirement Plans (401(k), etc)

6.8

6.7

6.4

7.0

Stock Options

6.8

6.5

4.9

6.1

Disability Insurance

6.8

6.7

6.3

6.7

Health Insurance

6.5

6.7

6.7

6.2

 

3. The respondents were asked to rate which of the employee benefits currently being offered were of the highest importance. Listed below are average ratings of most important benefits, according to these employees (scale of 1 to 10; 10 being very important; 1 being not important at all)

3rd Qtr
2001

2nd Qtr
2001

1st Qtr
2001

4th Qtr
2000

Firm Size

10-1,000

10-1,000

11-1,000

10-499

Health Insurance

9.1

9.2

9.2

8.6

Defined Contribution Retirement Plans (401(k), etc.)

8.1

8.3

8.5

7.7

Defined Benefit Retirement

Plan - Pension

7.3

7.7

8.2

7.3

Disability Insurance

7.3

7.7

7.9

7.4

Life Insurance

7.1

7.6

8.0

7.1

Profit Sharing/Bonus

6.2

6.9

7.0

7.0

Stock Options

4.2

5.2

5.3

5.1

 

4. The respondents were asked to name the employee benefits they wish their company would most improve upon. The top noted employee benefits are listed below.

3rd Qtr
2001

2nd Qtr
2001

4th Qtr
2000

1st Qtr
2001

Firm Size

10-1,000

10-1,000

10-499

11-1,000

Health Insurance

45%

37%

34%

40%

Defined Contribution Plans (401(k), etc)

16%

18%

15%

25%

None

13%

17%

19%

15%

Profit Sharing

8%

8%

8%

9%

Defined Benefit Plan - Pension

5%

6%

8%

4%

Life Insurance

4%

3%

4%

2%

Disability Insurance

2%

2%

3%

1%

Stock Options

2%

2%

3%

0%

Flex Time

2%

3%

0%

2%

Free Parking

2%

-

0%

1%

Tuition Reimbursement

2%

2%

0%

1%

Child Care Subsidies

0%

-

0%

0%

On-site Day Care

0%

-

0%

0%

 

5. Of the employee benefits not currently being offered, the respondents were asked to identify which employee benefits they want their current company to add:

3rd Qtr
2001

2nd Qtr
2001

1st Qtr
2001

4th Qtr
2000

Firm Size

10-1,000

10-1,000

11-1,000

10-499

Defined Benefit Retirement

Plan - Pension

20%

19%

24%

8%

Tuition Reimbursement

12%

8%

8%

7%

Flex Time

11%

10%

10%

12%

Profit Sharing / Bonus

11%

14%

13%

18%

Defined Contribution Retirement Plans (401(k), etc)

8%

10%

6%

5%

Disability Insurance

7%

4%

2%

5%

None

7%

9%

9%

13%

Child Care Subsidies

5%

3%

3%

0%

On-site Day Care

4%

7%

2%

8%

Health Insurance

4%

4%

5%

6%

Stock Options

3%

5%

9%

9%

Free Parking

3%

2%

4%

0%

Life Insurance

2%

3%

0%

0%

 

Employee reaction to statements about their financial future, benefits and retirement

1. The respondents were asked to identify to what degree they agreed or disagreed with the following statement - "My company is concerned about my (and my family’s) long-term financial future."

3rd Qtr
2001

2nd Qtr
2001

1st Qtr
2001

4th Qtr
2000

Firm Size

10-1,100

10-1,000

11-1,000

10-499

Disagree Somewhat

28%

21%

13%

24%

Neither Agree or Disagree

25%

28%

21%

25%

Disagree Completely

22%

28%

39%

30%

Agree Somewhat

19%

19%

21%

16%

Agree Completely

6%

5%

7%

5%

 

2. The respondents were asked to identify to what degree they agreed or disagreed with the following statement - "I am very concerned about my (and my family’s) long-term financial future."

3rd Qtr
2001

2nd Qtr
2001

1st Qtr
2001

4th Qtr
2000

Firm Size

10-1,000

10-1,000

11-1,000

10-499

Agree Completely

48%

51%

58%

47%

Agree Somewhat

29%

29%

26%

27%

Neither Agree or Disagree

12%

11%

6%

13%

Disagree Somewhat

7%

6%

8%

7%

Disagree Completely

4%

3%

2%

6%

 

3. The respondents were asked to identify to what degree they agreed or disagreed with the following statement - "Having a good benefits plan encourages/would encourage me to work harder and perform better."

3rd Qtr
2001

2nd Qtr
2001

1st Qtr
2001

4th Qtr
2000

Firm Size

10-1,000

10-1,000

11-1,000

10-499

Agree Somewhat

35%

39%

27%

35%

Agree Completely

26%

30%

32%

32%

Neither Agree or Disagree

26%

21%

26%

21%

Disagree Somewhat

7%

5%

10%

5%

Disagree Completely

6%

6%

5%

8%

 

4. The respondents were asked to identify to what degree they agreed or disagreed with the following statement - "I have not yet planned for retirement savings/security."

3rd Qtr
2001

2nd Qtr
2001

1st Qtr
2001

4th Qtr
2000

Firm Size

10-1,000

10-1,000

11-1,000

10-499

Disagree completely

29%

29%

33%

27%

Disagree somewhat

28%

24%

21%

27%

Agree somewhat

18%

20%

19%

16%

Neither Agree or Disagree

14%

13%

19%

14%

Agree completely

11%

14%

8%

16%

 

5. The respondents were asked to identify to what degree they agreed or disagreed with the following statement - "Having a good employee benefits plan keeps me/would keep me working for my current company."

3rd Qtr
2001

2nd Qtr
2001

1st Qtr
2001

4th Qtr
2000

Firm Size

10-1,000

10-1,000

11-1,000

10-499

Agree somewhat

43%

39%

37%

37%

Agree completely

34%

38%

38%

38%

Neither Agree or Disagree

16%

14%

21%

14%

Disagree somewhat

5%

5%

3%

6%

Disagree completely

2%

4%

2%

5%

 

6. The respondents were asked to identify to what degree they agreed or disagreed with the following statement - "I am extremely happy with my current financial well-being."

3rd Qtr
2001

2nd Qtr
2001

1st Qtr
2001

4th Qtr
2000

Firm Size

10-1,000

10-1,000

11-1,000

10-499

Disagree somewhat

33%

30%

33%

29%

Agree somewhat

27%

21%

21%

21%

Neither Agree or Disagree

20%

20%

17%

17%

Disagree completely

17%

23%

26%

26%

Agree completely

3%

7%

3%

8%

 

7. The respondents were asked to rank job security, long-term financial future and challenging work in order of importance to them. (The following percentages are number one rankings).

3rd Qtr
2001

2nd Qtr
2001

1st Qtr
2001

4th Qtr
2000

Firm Size

10-1,000

10-1,000

11-1,000

10-499

Job Security

46%

44%

42%

43%

Long-term Financial Future

40%

44%

37%

38%

Challenging Work

14%

13%

21%

19%

 

8. The respondents were asked how often they think about their long-term financial future. Responses are listed below.

3rd Qtr
2001

2nd Qtr
2001

1st Qtr
2001

4th Qtr
2000

Firm Size

10-1,000

10-1,000

11-1,000

10-499

One to six times a month

39%

35%

32%

36%

Two to 11 times a year

27%

28%

25%

29%

Seven or more times a month

26%

30%

33%

24%

Once a year or less

8%

7%

11%

11%

 

9. The respondents were again asked if they had made changes in how their retirement savings were invested – moving from volatile to more stable investments – due to the downturn in the stockmarket this year.

3rd Qtr
2001

2nd Qtr
2001

1st Qtr
2001

Firm Size

10-1,000

10-1,000

11-1,000

No, I have not made changes

62%

54%

68%

I do not have retirement savings

21%

25%

21%

Yes, I have made changes

17%

21%

11%

 

The following questions were new topics added to the 3rd Quarter 2001 Principal Financial Well-Being Index.

10. The respondents were asked how the terrorist attacks of September 11, 2001 and market volatility have affected their long-term retirement investment strategy. Responses are categorized below.

3rd Qtr 2001

Firm Size

10-1,000

10-500

501-1,000

I have not reviewed my long-term strategy, and do not plan to review it.

31%

31%

32%

I have already reviewed my long-term strategy.

28%

29%

21%

I did not previously have a long-term strategy

24%

23%

28%

I have not yet reviewed my long-term strategy, but now plan to do so.

17%

17%

19%

 

***Respondents who reported having reviewed their long-term strategy were asked a subsequent question (552 respondents) - "Since reviewing your strategy, have you changed the amount of money you plan to save in order to achieve your long-term retirement strategy?"

3rd Qtr 2001

Firm Size

10-1,000

10-500

501-1,000

I will be saving/deferring the same amount of money

70%

71%

67%

I will be saving/deferring more money

27%

25%

32%

I will be saving/deferring less money

3%

4%

1%

 

11. The respondents were asked at what age they planned to retire.

3rd Qtr 2001

4th Qtr
2000

Firm Size

10-1,000

10-500

501-1,000

10-500

65-69

41%

38%

54%

40%

60-64

24%

26%

17%

23%

70-74

15%

16%

9%

20%

55-59

14%

13%

17%

8%

Under 55

3%

4%

1%

9%

75+

3%

3%

2%

 

 

12. The respondents were asked about their spending plans for the upcoming holiday season. The chart identifies their stated intentions.

3rd Qtr 2001

Firm Size

10-1,000

10-500

501-1,000

Spend the same amount of money as last year

59%

59%

60%

Spend less money than last year

31%

30%

36%

Spend more money than last year

10%

11%

4%

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