Well-Being Index Finds Investors Jittery in a Down Market

August 21, 2001 (PLANSPONSOR.com) - Even though retirement savers are more tolerant than other investors in the face of market jitters, plan sponsors should be reinforcing the message that retirement investments are long-term propositions, results of a quarterly national survey suggest.

Although US workers have developed some tolerance for market fluctuations, their patience is wearing thin.

The Principal Financial Well Being Index, which aims to identify trends in consumer financial well-being, retirement planning, employee benefits and workplace trends, found that the number of people who have shifted a portion of their assets to more stable choices doubled to 28%, from 14% in the first quarter of 2001. The survey was conducted at the close of the second quarter,

Impact of Legislation

And while recent retirement savings legislation increased the amount workers can contribute to employer-sponsored or individual retirement accounts, only a third of the 1,200 respondents plan to save more. The same percentage reports that the new legislation would not impact their financial well-being.

Following the changes in the legislation,

  • 22% of male respondents plan to contribute more to their individual retirement accounts, compared to 11% of women
  • 22% of men will contribute more to their employer-sponsored retirement accounts, compared to 14% of their female counterparts.

Further, female respondents are not nearly as happy with their current financial well-being as are their male counterparts. Only 39% of women are extremely happy with their financial well-being, compared to 54% of male respondents.

The survey shows that 34% of the sample have not yet planned for retirement, up from 27% in the previous quarter, with those working for smaller firms, employing 10-500 workers, even less likely to have begun planning for retirement than their counterparts at businesses employing between 500 to 1,000 workers.

Benefit Plans

In addition, the survey found that benefit plans continue to be a key employee incentive and retention tool, with 69% of workers saying that a good benefits plan would encourage them to work harder and perform better, up 10% from the previous quarter. Furthermore, 77% of respondents said that a good benefits package would keep them at their current companies.

On Sabbatical

Nearly half of respondents would like to take a break from their careers, but cannot do so for financial reasons, their employer’s unwillingness to allow it, or other reasons. More than 10% of the respondents reported that they have taken or plan to take a sabbatical.

In terms of taking a sabbatical, employees’ chief benefit concerns were:

  • maintain health insurance coverage, cited by 85%
  • followed by life insurance, listed by 28%
  • defined contribution retirement plan benefits at 27%
  • disability insurance, which was noted by 18%.

The Index also found that workers are increasingly placing more emphasis on the importance of their long-term financial future. When asked to rank overall importance of several statements, 44% of respondents ranked both job security and long-term financial future as most important, where in previous surveys, more respondents had ranked job security first.