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The Principal Financial Well-Being IndexSM Executive Summary - First Quarter 2002

Summary of Survey Findings
In the wake of visible Enron headlines and a weakened economy, the 1st Quarter 2002 Principal Financial Well-Being IndexSM reveals that American workers have increasing concerns about their overall financial well-being. And, as a result of the economic recession, Americans are closely monitoring their financial situations.

Yet despite uncertainty over the economy and unsettling events like the Enron collapse, workers are behaving rationally. Many are reviewing their retirement investment savings portfolios and some are making adjustments, but it appears that few are acting in haste or trying to "time the market."

Workers continue to save for retirement, labeling it their leading financial concern, and they regularly devote significant thought to their long-term financial futures. However, a "hierarchy of needs" is reflected in the results of this current study. Following saving for retirement, a substantial percentage of respondents identify reducing credit card and short-term debt and covering monthly expenses as immediate financial concerns. The desire to reduce credit card and other debt is especially notable in light of the 4th Quarter 2001 Well-Being Index, which said the majority of Americans planned to spend the same amount or more during the holidays as in previous years, despite their growing concerns.

The Principal Financial Well-Being Index, a national survey of 1,500 American workers at businesses with between 10 and 1,000 employees, reveals real short-term financial well-being concerns. Workers are reacting to the well-publicized stream of layoff announcements in the last year. When asked to rank the importance of job security, long-term financial future and challenging work, job security has overtaken long-term financial future as the most important issue, growing steadily over the past three quarters.

The vast majority of American taxpayers have yet to discover the availability of recent legislation that could provide financial opportunity. A mere five percent of employees plan to take advantage of the new Economic Growth and Tax Relief Reconciliation Act (EGTRRA) effective in 2002 by rolling all of their retirement accounts into one.

Even as the Enron collapse captures headlines, and Americans are further sensitized to the basic tenets of managing a retirement investment portfolio, many workers do not seek out or have access to professional investment advice. Nearly 70 percent of workers look to family and friends for financial advice, and 40 percent consult with financial planners and financial services firms for professional advice concerning financial products and investment decisions.

Overall, the majority of American workers remain satisfied with their current benefits, and as salaries and bonuses are curtailed, workers are paying closer attention to their benefits. Half of the respondents expect their benefits package to remain the same in 2002, although one-third expect to see their benefits packages reduced over the next year, underscoring importance for businesses to communicate effectively with employees about the value of their workplace benefits.

Major Findings

Employee Financial Future and Well-Being

  • Job security has been steadily increasing in importance over the past three quarters, rated number one in importance by 50% of employees in the First Quarter of 2002, while long-term financial future has shown a simultaneous decrease in importance.

Regarding financial well-being, American workers indicate they are most concerned on a regular basis about saving for retirement, followed by reducing short-term and credit card debt.

Biggest Concerns In Current Financial Situation 1 Qtr 2002 Total
Saving for Retirement 72%
Reducing Credit Card/ Short-Term Debt 56%
Covering Monthly Expenses 50%
Saving for Education 12%
Other 5%
None 2%
  • As short-term concerns have mounted, American workers have spent less time considering their long-term financial futures; however, the majority of workers continue to think about their financial futures at least once per month.
How Often Employees Consider Their 'Personal Long-Term Financial Future' 1 Qtr 2002
Total
4 Qtr 2001 3 Qtr 2001
1 a year or less 11% 8% 7%
2 to 11 times per year 36% 27% 28%
1 to 6 times per month 31% 39% 35%
7 or more times per month 23% 26% 30%

Employee Reactions to the Economy

  • 56 percent of the employees surveyed have not made changes to their long-term retirement strategy due to current economic conditions. Yet approximately one-third has made changes.

  • One in four employees have recently postponed major purchases due to current economic conditions, and one in five have increased debt on their credit cards.
  • Only five percent of employees plan to take advantage of the new Economic Growth and Tax Relief Reconciliation Act effective in 2002 and roll all of their retirement accounts into one account. Nearly half of workers have only one retirement savings account, and 18 percent have no retirement savings at all.
Employee Use of Trusted Advisors
  • The majority of employees (69 percent) seek advice from their friends and family concerning financial products and/or investment decisions.
  • Next to friends and family, employees turn to the advice of professional financial planners and benefit providers/financial services companies (40 percent).
  • One out of every four respondents seeks no advice at all concerning financial products and investment decisions.
Person Normally Approached Concerning Financial Products and/or Investment Advice 1st Qtr 2002
Family Members 36%
Friends 33%
Professional Financial Planner 21%
Benefit Provider/Financial Service Co. 19%
Accountant 12%
Employer 11%
Stock Broker 10%
Insurance Agent 6%
Other 5%
Don't Seek Advice 25%

Employee Attitudes Toward Benefits

  • Half of American workers surveyed expect their employee benefit packages to remain the same through 2002. One in three employees expect their benefit packages to decline over the next year.
  • The benefits employees most wished their company provided were defined benefit plans, followed by profit sharing/bonus and flex time.

  • Similar to the previous quarter, employees continue to be most satisfied with their Defined Benefit Retirement plans, giving it an average rating of 7.4 on a ten-point scale. Defined contribution plan satisfaction follows closely with an average rating of 6.9. Not surprising in the wake of Enron, satisfaction with stock options and profit sharing declined.

Employee Benefit Coverage Satisfaction 1st Qtr 2002 4th Qtr 2001

---On a scale of 1 to 10 with 10 being the most satisfied
---Top 3 Box - rated 8, 9, or 10

Satisfaction Average Rating

Top 3 Box

Satisfaction Average Rating

Top 3 Box

Health Insurance 6.7 6.5
Defined Contribution Plans 6.9 6.8
Life Insurance 7.1 6.9
Free Parking - -
Disability Insurance 6.9 6.8
Tuition Reimbursement - -
Flex Time - -
Defined Benefit Plans 7.4 7.3
Profit Sharing/Bonus 6.4 6.9
Stock Options 5.9 6.8

Gender Comparisons

  • Female respondents were slightly more likely to seek financial advice from their place of employment and benefit provider companies than their male counterparts.
Person Normally Approached Concerning Financial Products and/or Investment Advice Male Respondents

Female Respondents

Family Members 42% 40%
Friends 41% 34%
Professional Financial Planner 25% 22%
Benefit Provider/Financial Service Co. 17% 21%
Accountant 14% 13%
Employer 9% 15%
Stock Broker 8% 7%
Insurance Agent 5% 7%
Other 9% 4%
Don't Seek Advice 23% 23%
  • In response to the recession, female respondents were more likely to have increased their credit card debt than males (28 percent vs. 15 percent).
  • 53 percent of females have only one retirement account, as opposed to only 38 percent of males.
  • Male respondents ages 18 to 34 were more concerned about saving for retirement (70 percent) than their female counterparts of the same age (54 percent).
  • Female respondents were more concerned about saving for education between the ages of 18- 34 (30 percent) than between the ages of 35-44 (13 percent).
Overview

This most recent Principal Financial Well-Being IndexSM was conducted in January 2002 by Harris Interactive, Inc. This is the fifth in a series of quarterly studies to identify and track trends in the workplace of growing businesses. The first Index was released in the first quarter of 2001. Harris was commissioned by the Principal Financial Group to survey employees of growing U.S. businesses about their attitudes regarding their financial well-being and employee benefits.

Methodology

Harris Interactive conducted the study in cooperation with members of the Harris Poll, which is composed of a subset of a panel of more than seven million cooperative respondents via the Internet. More than 1,500 employees of growing companies (size range 10 - 1000) 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 + 2.5 percent.

** Note To Editors **

More detailed statistical information on the Principal Financial Well Being Index is available by contacting Tom Nolan at 212-279-6935 or e-mail at tom.nolan@publicis-usa.com.

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