Expectations the economy will get worse by the end of 2009 dropped significantly from the first quarter to the second quarter – from 24% to 18%, according to a press release. About one-third of workers (37%) and retirees (31%) expect the current economic crisis to be better by the end of 2009.
Four-in-ten (41%) workers now say it will take only two to five years to recover the retirement balances they had at the beginning of January 2008, while 15% think it will take six to 10 years. Only 3% of workers think they will never recover their account balance, the press release said.
Despite the harsh economic downturn, when it comes to saving for their long-term financial well being, 14% of workers have increased the amount they are saving for retirement over the past six months and the number of workers not saving for retirement has dropped from 20% in the first quarter this year to 16%.
Thirteen percent of workers said they are delaying their planned retirement date because of current economic conditions, an increase from 10% of workers in first quarter of this year. Thirty-five percent of workers said they have not changed their planned retirement date.
Following the harsh economic downturn, workers and retirees are demonstrating smart habits to preserve their financial well-being, according to Principal.
Principal found Americans are recognizing the importance of an emergency fund as a backstop if faced with a sudden loss of income or another unforeseen circumstance, according to the news release. More than half of workers (59%) and two-thirds of retirees (67%) have an emergency fund they can immediately access if necessary.
Sixty-six percent of retirees and 36% of workers said they could cover more than six months of living expenses - both percentages up significantly from the fourth quarter 2008. While workers are saving more, nearly nine out of 10 retirees and workers say they haven't tapped into these funds.
Other key findings, according to the press release, include:
- Because of current economic conditions, half of retirees and six of 10 workers are preparing more meals at home instead of eating out.
- Three of 10 workers indicate they have started bringing their lunch to work.
- More than a quarter of both retirees and workers have started to "shop" in their own closets instead of making new purchases.
- Twenty-one percent of workers with children have cut back on the number of activities their children are involved in because of financial constraints.
- Forty-eight percent of workers and 42% of retirees say they paid more often with cash than with credit cards in the past six months.
- Thirty-six percent of workers and 24% of retirees have altered their vacation plans to save money.
The Principal Financial Well-Being Index is at www.principal.com/wellbeing .
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