Survey: Investor Patience Wears Thinner As Market Sags

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Investors growing sophistication had them riding out the previous stock market downturn, having heard repeatedly from advisors that that choice would pay off in the long run. But as negative news from the market continues, a new study finds that investors’ patience is wearing thin.

According to the Principal Financial Well-Being Index, a national quarterly survey of more than 1,200 employees of growing U.S. businesses done by Harris Interactive, Rochester, N.Y., for the Principal Financial Group, Des Moines, Iowa, 28% of workers surveyed said they have moved some of their investments to less risky choices, up from 14% three months ago.

Response to recent legislation increasing contribution limits to employer-sponsored or individual retirement accounts, which enjoy favored tax status, has been mixed, according to the survey.

About 30% of respondents said they plan to put more in their retirement plans due to the legislation; another 33% said they dont see the relaxed rules impacting their financial well-being.

“The Principal Financial Well-Being Index tells us that the vast majority of American workers continue to remain very concerned about their financial future, yet workers react in somewhat divergent ways, which reinforces the call for vigilant employee education,” says Daniel Houston, senior vice president, Principal.

“Evidence from earlier Indices shows that American workers have developed more tolerance for market fluctuations–a sign that investment education is paying off. However, after three more months of a flat market, the survey shows that investor patience is beginning to wear thin.”

Also up is the percentage of employees who have not yet planned for retirement, according to the survey.

Another survey finding is that employees who work in small firms (10-500 employees) are less likely to have begun planning for retirement than employees at larger businesses (500-1,000 employees).

“This shows that education is an even more critical issue for growing businesses, which may not have the resources to effectively help employees plan for financial well-being,” Houston says.

Sixty-nine percent of those surveyed said a good benefits plan would be an incentive to improve their work performance; 77% said a good plan would keep them at their current place of employment.

The survey also tracked an emerging employee benefits trend: sabbaticals, or mid-career retirements.

Almost half of respondents indicated they would like to take a sabbatical, but cannot for financial reasons; because their employers would not give the approval; or other reasons.

More than 10% either have taken or plan to take a sabbatical, the survey finds. The foremost benefits concern of 85% of respondents regarding a sabbatical is maintaining health insurance coverage. Twenty-eight percent said maintaining life insurance is a primary concern; for 27%, maintaining defined contribution retirement plan benefits is a primary concern; for 18%, maintaining disability insurance is a primary concern.

“At a minimum, growing businesses today must offer competitive health and retirement benefits to attract and retain talent,” Houston says. “This is particularly true during periods of slow economic growth, when salaries can stagnate.

“Less-traditional benefits, such as sabbaticals, are being evaluated by key employees and should be reviewed by business owners,” he says.

The survey also found differences in the perception of financial well-being according to gender. For example, as a reaction to the aforementioned increase in retirement plan contribution limits, 22% of men plan to contribute more to both their IRAs and employer-sponsored retirement plans; only 11% of women plan to place more in their IRAs and 14% plan to save more in their employer-sponsored plans.

“Women outlive men by an average of seven years, which can impact retirement savings and health insurance greatly, and women have considerably lower lifetime earnings due to childbearing, family responsibilities and salaries of, on average, thirty percent less than men,” Houston says.

Fifty-four percent of male respondents said they are extremely happy with their current financial well-being; only 39% of female respondents feel that way.

Another survey finding is the increasing importance of long-term financial success. For the first time in three surveys, it was ranked equally with job security as most important of several statements by 44% of respondents. In the previous two indices, more respondents ranked job security as most important.


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 10, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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