Principal Financial released its fourth quarter Financial Well-Being Index on Wednesday, which tracks changes among small and mid-sized businesses. The Index included responses from two broad groups: employees who work at U.S. businesses with between 10 and 1,000 workers; and retirees over 60, including those who may be employed part-time or self-employed in a second career.
While fewer people reported feeling "very concerned" about their long-term financial futures this quarter, that percentage is relatively unchanged from fourth quarter 2009. Fifty-six percent of retirees and 72% of employees said they were very concerned. Furthermore, 26% of employees said they hadn't yet planned for retirement.
The holidays may have little effect on spending, according to the Index. Forty-one percent of employees and 39% of retirees said they will spend less per gift this year; 38% of employees and 31% of retirees say they will buy gifts for fewer people. Sixty percent of employees and 62% of retirees will spend less than $500. Charities will suffer as well, as 18% of employees say they will give less.
Still, the holiday season will be better in 2010 than it was in 2009. The percentage of people in both groups who say they will spend the same amount on the holidays as last year is up from the fourth quarter 2009 index. Just 31% of employees say they will spend less than last year, compared with 46% in 2009. Among retirees, 39% will spend less this year, compared with 46% in 2009.
Reducing credit card debt and saving are priorities for retirees and employees. The top two New Year's resolutions for employees are to pay down credit card debt (35%) and save a certain amount of money each month (30%). Retirees' top resolutions are to reduce spending (19%), pay down credit card debt (17%) and to save a certain amount each month (15%).
Health care costs are the top concern for 2011, especially, and perhaps unsurprisingly, among retirees (71%), although employees agreed it was their top concern (65%). Nearly two-thirds of employees and 53% of retirees feel health care reform will directly impact their insurance costs; 19% of employees and 18% of retirees say they have already been negatively impacted. Other concerns include economic uncertainty and increased taxes.
While employees and retirees recognize they need to take steps to actively rebuild their financial well-being, they are cutting back on spending instead of saving. Less than one-quarter of employees and 15% of retirees have increased saving for an emergency fund, while 57% of employees and 64% of retirees say they are spending less. Half of employees and 37% of retirees have paid down debt.
Just 18% of employees are increasing their retirement savings, and only 23% consider it a top priority. Living within their means was named by 62% of employees as their top priority in their attempts to rebuild their financial well-being, followed by having an emergency fund (46%), and planning – and sticking to – a budget (35%).