Workers are Paying More Attention to Retirement Savings

March 11, 2009 ( - The latest Principal Financial Well-Being Index indicates American workers and retirees are taking charge of their personal financial well being by spending less and focusing more on their long-term financial future.

According to a Principal press release, recent market volatility has caused about half of workers (49%) to review their financial strategies, and there is growing concern among Americans regarding their ability to save for retirement (66%, up from 60% a year ago).

This appears to have encouraged them to take action and better prepare, Principal said, as less than one-quarter (20%) of those included in the Index indicated they have not yet planned for retirement, compared with 26% last year. In addition, 14% of workers indicated they have actually increased the amount they are saving toward retirement, compared with 11% last quarter.

Contrary to historical behavior, more than half of workers (58%) are actively engaged in regularly or constantly checking the status of their retirement accounts, the press release said. The Index shows that among those with retirement savings, nearly three-fourths (73%) are either saving the same amount or have increased the amount they are saving toward retirement, and 23% (compared with 14% during fourth quarter 2008) have moved from volatile to more stable investments over the past six months.

Principal also found Americans are demonstrating more discipline when it comes to discretionary spending, as only 5% of retirees and 10% of workers said they were moved by special incentives and sales offered by retailers to purchase items they “do not need.” In addition, as financial concerns mount, significantly more workers (73%, up from 66%) and retirees (66%, up from 59%) compared with the fourth quarter 2008 reduced their overall spending during the past two months, according to the Index.

Principal found more than half of retirees (55%) were not aware that Congress suspended the required minimum distribution (RMD) requirement for 2009. Ten percent of those age 70 ½ or older indicated they will take full distribution in 2009, and 6% said they will take a distribution, but less than their full amount in 2009. Only 13% said they will not take any distribution in 2009.

More than two-thirds of workers (67%) included in the Index expressed concern over their own personal job security. According to a press release, to prepare for the worst-case-scenario, they are taking the following actions:

  • 43% have cut spending on miscellaneous items (e.g., eating out, takeout coffee, entertainment, consumer purchases).
  • 23% have tried to save more each month.
  • 19% have cut fixed monthly expenses (e.g., gym membership, media subscriptions, cable TV).

Workers' expectations for receiving a raise in 2009 are mixed, the press release said. Only 12% of workers have already received a raise from their employer, and more than one-third of workers (35%) anticipate a raise from their employer this year. However, 43% of workers do not anticipate a raise from their employer this year.

The Index provided insight into what would trigger Americans to spend more. Forty-three percent of workers and more than one-third of retirees (35%) said that a major personal tax cut would get them to spend more. Another 40% of retirees and 35% of workers indicated a significant rise in the stock market would do it, while 23% of retirees and one-quarter of workers pointed to lower interest rates. One-quarter of both groups said that lower unemployment rates would encourage them to spend more.

The Principal Financial Well-Being Index can be viewed at .