Workers More Thrifty with Tax Refunds

March 7, 2006 ( - While the number of workers expecting a federal or state income tax refund (84%) remains about the same as in previous years, how they plan to use it is changing.

According a press release on the latest Principal Financial Well-Being Index, there’s a notable decrease in the number of workers who plan to spend their refund on big ticket items, from 16% in 2003 down to 7%. There was also a decrease in the number who plan to pay down short-term debt, from 50% in 2003 to 44% in the most recent survey.

Meanwhile, those surveyed who said they would save and invest their refund increased from 31% in 2003 to 38%, the release said.

Another sign of thriftiness among workers surveyed is the accuracy with which those who participate in a Flexible Spending Account (FSA) estimated their medical expenses. Almost half (44%) said they estimated their actual medical expenses within $100 in 2005. Thirty-nine percent said they underestimated expenses and did not put away enough into their FSA, while 16% overestimated the amount they would need for medical expenses.

Concerning other medical issues, workers in the recent survey are less worried about major events such as a car accident, serious illness, or death happening to them in the coming year. Given a list of five events, 51% of respondents said none were likely to occur, up from 37% in 2004.

While fewer workers feel they are likely to be involved in a car accident (15% compared to 26% in 2004) or become seriously ill or die (2% vs. 5%), more workers are concerned about the prospect of seeing a doctor for stress, anxiety, or depression (24% vs. 21% in 2004). Females (32%) were more concerned about this prospect than males (18%). Meanwhile, males felt they were more likely to be in a motor vehicle accident (19%) or suffer a bad back that will keep them out of work (10%), than females (11% and 5%, respectively).

Despite the confidence that major medical events will not happen, 14% of workers surveyed reported actually having an accident or illness occur that kept them out of work for more than three months, up from 11% in 2004. When asked where they would turn for financial resources through a disability, workers chose:

  • Workplace disability insurance benefits – 41%
  • Spouse or family – 33%
  • Personal savings – 26%
  • Retirement savings – 16%
  • Sell of investments – 13%

The Principal Financial Group commissioned Harris Interactive to conduct an online study of 1,374 full- and part-time employees (ages 18+) of small and mid-sized US businesses (firm size 10 – 1,000) between January 31and February 8, 2006, about their attitudes and perceptions regarding their financial well-being and their current employee benefits.

Principal Financial Well-Being Indexes can be accessed at .