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The Principal Financial Well-Being IndexSM Summary 1st Quarter 2011

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 January 26th and February 4th, 2011 among 1,127 employees and 520 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, 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: 160 KB) - includes all questions and data

Featured Key Findings

  • Financial Well Being
    • Compared to 4th quarter of 2010 (72%), significantly fewer employees now are concerned with their long-term financial future (61%). 
    • Two out of five retirees (43%, up significantly from 36% last quarter) are extremely happy about their current financial well being compared to significantly fewer employees (29%).
      • Employees who use a financial advisor for financial advice, guidance, and/or products for a fee or commission are significantly more likely to report they are extremely happy with their current financial well being (38%) than employees who do not use a financial advisor (26%)  
    • Just about a quarter of employees (24%) have not yet planned for retirement savings/security.
      • Employees who do not use a financial advisor are significantly more likely to have not yet planned for retirement savings/security (28%) than employees who do use a financial advisor (11%).
  • Economic Outlook
    • When asked how they would describe their sentiment regarding the economic outlook for 2011, over two out of five employees (45%) and almost three out of five retirees (57%) selected “cautious”. 
    • Over a quarter of employees (28%) and one in five retirees (20%) said they are “optimistic” regarding the economic outlook for 2011. 
    • Only 15% of employees and 17% of retirees are “pessimistic” regarding the economic outlook for 2011.
  • Financial Dreams
    • Over half of employees (53%) and just under half of retirees (47%) agree that the economic crisis has caused them to modify their financial dreams for the future to make them more obtainable.
      • Baby Boomer employees (61%) are more likely to have had to modify their financial dreams for the future to make them more obtainable than are Gen X (47%) and Gen Y employees (39%). 
    • Over a third of employees (37%) agree that the economic crisis has caused them to delay their retirement date because it will take them longer to achieve their financial dreams.
      • Baby Boomer employees (46%) are significantly more likely than Gen X (29%) and Gen Y (17%) employees to have had to delay their retirement date because it will take them longer to achieve their financial dreams.
  • Income Tax Refunds –
    • Among employees who have an idea if they will receive a federal or state tax refund for 2010 (those answering “not sure” were excluded), almost three-quarters (72%) expect to receive a refund.  As seen in previous years, significantly fewer retirees (44%) than employees (72%) expect to receive a tax refund.
    • Employees’ and retirees’ plans for their refund include saving or investing the refund (44% employees; 50% retirees) or paying down/off short-term debts (42% employees; 23% retirees).
  • Financial Advisor Usage –
    • Approximately a quarter of employees (23%) and a third of retirees (35%) indicate they use an advisor who provides them financial advice, guidance, and/or products for a fee or commission.
      • Employees in households with $125,000 to $199,999 in income are significantly more likely to use a financial advisor (37%) than employees in households who make $74,999 or less (range is 4% - 21% depending on household income category, please refer to Table 11 on page 10).
    • Of those who use an advisor, about two thirds of both employees (64%) and retirees (65%) have worked with their advisor to establish goals for their financial security. 
    • Around half of both employees (50%) and retirees (48%) who work with an advisor have created a plan to achieve their financial goals. 
    • Only 15% of employees and 13% of retirees who use a financial advisor have neither established financial goals nor created a plan to achieve their financial goals.
    • Over a quarter of employees (28%) and a third of retirees who do not currently use a financial advisor think they would need $100,000 or more in savings or investments in order to feel comfortable using an advisor for financial advice or guidance.
  • 401(k) Participation
    • Eighty percent of employees who are eligible to participate in a defined contribution plan say they are currently participating, down significantly from 85% in the 4th quarter of 2010. 
    • Employees participating in their employer’s 401(k) program were asked what would encourage them to increase the amount they are contributing to their account.  The most popular response was an increase in pay, chosen by nearly three quarters of employees (71%).  Other common responses include an increase in the percentage their employer will match (43%), a positive rate of return on their account (27%) and improvements in the economy (26%).
  • Retirement Savings and Readiness
    • Approximately half of employees (48%) are aware of the amount of money they will need in order to be comfortable in retirement.
      • Employees who use a financial advisor (67%) are more likely than employees who do not use a financial advisor (42%) to indicate they are aware of the amount of money they need in order to be comfortable in retirement.
      • Baby Boomers (57%) are the generation most likely to agree that they are aware of the amount of money they will need in order to be comfortable in retirement (please refer to Table 24 on page 19 for details). 
      • Males (57%) are more likely than females (40%) to report being aware of the amount of money they will need in order to be comfortable in retirement. 
    • Only 30% of employees agree that they are saving enough money in order to live comfortably in retirement. 
      • About half of employees (48%) who use a financial advisor believe they are saving enough money in order to live comfortably in retirement, compared to a quarter of employees who do not use a financial advisor. 
  • Social Security Payroll Tax Reduction
    • Thirty percent of employees will be using the additional take home pay from the 2011 Social Security payroll reduction to cover daily expenses. 
    • Another quarter or so of employees (24%) will be increasing the amount of money they are saving. 
    • One in five employees will be paying down/off short-term debt while 14% of employees will be paying down/off longer-term debt. 
    • Fifteen percent of employees will be increasing their retirement savings, either through their employer sponsored retirement account (8%) or another retirement account (7%). 
  • Employee Benefits - Employees continue to rate health insurance as the most important benefit, followed by defined contribution retirement plans and dental insurance.  Health insurance is the benefit most employees would like to see improved, while defined benefit plans is the benefit most employees would like to see their employer offer.  
  • Disability Income Insurance
    • About three-fourths of employees (74%) rated the emotional impact of becoming disabled and not being able to work for a living as at least an 8 on a 10 point scale in which a 10 means “devastated.”
    • Just over one in five employees (22%) own disability insurance. 
      • Employees who use a financial advisor (32%) are more likely to own disability income insurance than employees who do not use a financial advisor (19%).
    • The most common reason employees do not own disability income insurance, selected by two out of five employees (40%), was cost in that it’s too expensive to purchase this type of insurance.  Another common reason was that employees are covered by disability insurance benefits through their employer (32%).
  • Voluntary Benefits at the Workplace
    • The top voluntary benefits offered are dental (52%), vision (41%), short-term disability (36%) and long-term disability (34%).  These same voluntary benefits are the most commonly purchased voluntary benefits.
    • Just under half of employees who have purchased voluntary benefits (48%) thought the voluntary benefit education provided by their employer was either very good (42%) or excellent (6%).
      • Materials that are easy to understand (67%), having enough time to make a decision (52%), being able to meet one-on-one with someone (46%) and having a helpful enroller (44%) were all cited reasons for having a good voluntary benefit education experience.
    • Two thirds of employees (67%) rated their confidence in making voluntary benefit decisions with the amount of education provided by their employer as confident, very confident or extremely confident.

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