Americans Not Apathetic About Retirement Planning; Principal Financial Well-Being Index Suggests Workers Deliberately Holding to Long-term, Despite Market Volatility.

Business Editors

DES MOINES, Iowa--(BUSINESS WIRE)--Dec. 10, 2002

Contrary to popular assumption, workers are not responding to depressing 401(k) statements with apathy, fear, or confusion. In fact, there is now evidence that American workers are holding to their retirement investment strategies quite rationally and deliberately - heeding time-tested investment principles.

So suggests the Fourth Quarter 2002 Principal Financial Well-Being Index, a quarterly survey of American workers administered by Harris Interactive(R) and sponsored by the Principal Financial Group(R).

When asked whether the stock market and current economic conditions had led them to move retirement funds from volatile investments to more stable ones, 66 percent of those polled said they had not changed how their retirement savings are invested. Of this non-changing group, 58 percent stuck with their investments because they "believe in long-term investing" while 13 percent said they were "following the advice of a financial planner." Only 19 percent noted that their inaction stemmed from being confused by myriad investment options.

"The latest Well-Being Index provides real evidence that American investors are reacting thoughtfully to volatile markets and a soft economy," said Dan Houston, senior vice president, The Principal. "We're pleased to see workers giving serious consideration to their retirement investments and believing in the long-term potential of the markets to ride out market swings."

Houston acknowledged that while most retirement investors are holding tight, 34 percent (up from 20 percent last quarter) did move some of their savings to more stable investments. "Investors may be moving, but typically for the right reasons," he explained. "They're making strategic asset allocation changes during fall open enrollment periods and carefully rebalancing their portfolios. But few are trying to time the market."

"Plus, they are more closely monitoring their investments as they near retirement," he continued, pointing out that the survey revealed that workers over the age of 55 were more likely to have made changes (46 percent) in how their retirement savings are invested than those of younger workers age 20 to 34 (30 percent) or 35 to 44 (32%).

Job Security

High unemployment this quarter and highly publicized layoffs have underscored the importance that employees place on job security. When asked what was most important to them -- job security, long term financial future or challenging work -- 57 percent, the highest reading ever recorded by the Principal Financial Well-Being Index, rated job security as number one in importance. Just three months ago, 47 percent rated job security as most important. Younger employees (under age 35) rank job security as most important less often than their older co-workers.

"Most economists are forecasting better days for unemployment and the general economy, but workers remain concerned for their jobs," explained Houston. "That's why we advise our clients to continually communicate with their employees to help them fully understand how to make the most of the their employee benefit package."

New Year's Resolutions

With 2003 around the corner, many of those surveyed are resolving to improve their financial well being in 2003. While the leading New Year's resolutions relate to exercising more (53 percent of workers), losing weight (46 percent), and eating more healthfully (45 percent), an additional 44 percent want to save more money, 31 percent want to spend less money, and 16 percent want to plan for retirement. "Placing more emphasis on savings at this very point of a bear market demonstrates that American workers are concerned about their financial futures," Houston said.

Although there are signs that the recession may be ending, consumers plan to spend less money during this holiday season. One year ago, 31 percent of respondents indicated they were planning to spend less than the previous year; however, 39 percent of this year's respondents intend to do so.

Financial Well-Being

Among the other interesting findings of the Fourth Quarter 2002 Principal Financial Well-Being Index:

-- The lackluster economy is adversely affecting how employees feel about their overall financial well-being. Only 22 percent of Index respondents stated they were "extremely happy" about their current financial well being, down from 29 percent two years ago.

-- Employee benefits continue to be important to workers and a good benefits plan encourages most to remain with their company. Sixty-two percent of the respondents agreed with the statement "Having a good benefits plan encourages me to work harder and perform better."

-- Despite Enron and other cases of corporate malfeasance, employees of growing businesses seem to have increasing faith in their employers. 27 percent believe their employer is "concerned about my long-term financial future." That is up from 24 percent in the Fourth Quarter of 2001.

For a complete copy of the Fourth Quarter 2002 Principal Financial Well-Being Index and Executive Summary, contact Susan Houser at 515-248-2268 or Terri Shell at 515-283-8858. Or go to www.principal.com.

The Principal Financial Well-Being Index

The Principal Financial Well-Being Index is a quarterly study that identifies and tracks trends in consumer financial well-being, retirement planning, employee benefits and workplace trends. It is conducted by Harris Interactive and commissioned by the Principal Financial Group, the nation's 401(k) leader. The fourth quarter survey was conducted online among a national sample of 1,654 employees of growing businesses (10 to 1,000 employees), weighted to reflect that population, during November 2002. "Propensity score" weighting was also used to adjust for respondents' propensity to be online. With a probability sample of this size, one can say with 95 percent certainty that the results have a statistical precision of +/- 2.4 percentage points; however, this was not a probability sample.

About The Principal

The Principal Financial Group(R) (The Principal (R))(1) is a leader in offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement and investment services, life and health insurance and mortgage banking through its diverse family of financial services companies. More employers choose the Principal Financial Group for their 401(k) plans than any other bank, mutual fund, or insurance company in the United States(2). A member of the Fortune 500, the Principal Financial Group has $117.4 billion in assets under management(3) and serves some 13 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.

About Harris Interactive(R)

Harris Interactive (www.harrisinteractive.com) is a worldwide market research and consulting firm best known for The Harris Poll(R), and for pioneering the Internet method to conduct scientifically accurate market research. Headquartered in Rochester, New York, U.S.A., Harris Interactive combines proprietary methodologies and technology with expertise in predictive, custom and strategic research. The Company conducts international research through wholly owned subsidiaries--London-based HI Europe (www.hieurope.com) and Tokyo-based Harris Interactive Japan--as well as through the Harris Interactive Global Network of local market-and opinion-research firms, and various U.S. offices. EOE M/F/D/V

(1) "The Principal Financial Group" and "The Principal" are registered trademarks referring to Principal Financial Group, Inc.

(2) CFO Magazine, April/May 2002, based on total plans served in 2001 by insurance companies, banks and investment firms.

(3) As of September 30, 2002.