Data & Research March 11, 2008

Workers Becoming Enthusiastic About Auto-Savings Programs

Nearly half (48%) of workers agree that employees should be automatically enrolled in their employer-sponsored 401(k) retirement plan with a standard savings rate, according to the latest Principal Financial Well-Being Index.
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For workers in the survey who elect not to participate in an employer-sponsored retirement plan, 57% said it is mainly because they lack financial resources to do so. Another 15% indicated they are not eligible for their plan, and 13% said they are too uncomfortable about investing.

Among those workers whose employer does not offer access to a retirement plan, one out of five (21%) said they are not saving at all for retirement, and nearly half (47%) indicated they are using their checking and/or savings account as a means of saving for retirement.

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In addition to interest in automatic programs increasing, the uptake of lifecycle/target-date funds also continues to grow. Nearly one-fourth (24%) of those workers who indicated they prefer to have someone manage their funds for them, said they would select a lifecycle/target-date fund that is handled by a fund manager based upon their estimated retirement year.

Concerns About Debt

The Principal found nearly half of respondents (49%) listed job security as being most important to them, followed by long-term financial security (37%), and challenging work (14%). The index revealed that more than two-thirds of workers (67%) are very concerned about their long-term financial security. Sixty percent of workers expressed concern about their ability to save for retirement, while nearly half expressed concern about even being able to cover monthly expenses (49%) and reduce credit card debt or pay off short-term debt (41%).

Concern about credit card or short-term debt is also seen when workers discuss what to do with their income tax refund. Most workers (83%) do expect income tax refunds and nearly half of workers (45%) said they plan to use the proceeds to pay down or pay off short-term debt; 40% indicated they plan to save or invest the refund; and 22% said they will pay down or pay off longer-term debt. Only six percent of workers indicated they would splurge on big-ticket items.

Significantly fewer retirees (46%) expect a refund this year, the press release said. Although the same number of retirees plan to save or invest their refund (40%), only 16% plan to pay down or pay off short-term debt, and 22% plan to pay off longer-term debt.

This Principal Financial Well-Being Index survey was conducted online within the United States by Harris Interactive on behalf of the Principal Financial Group between January 28 and February 3, 2008, among 1,316 employees and 589 retirees.

The Markets March 11, 2008

Dow Jones Creates 130/30 Investment Strategy Indexes

Dow Jones Indexes and Transparent Value LLC have launched the Dow Jones Required Business Performance (RBP) Index series, with indexes that measure the likelihood that a company can deliver the performance required to support its current stock price.
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The likelihood that a company will deliver the performance required to support its current stock price is measured according to Transparent Value’s proprietary RBP methodology.

The Dow Jones RBP Large-Cap 130/30 Indexes, the first indexes in the series, use the RBP probability metrics to create 130/30 investment strategy indexes based on U.S. large-cap stocks, according to the announcement.

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The index universe for the Dow Jones RBP Large-Cap 130/30 Indexes includes all stocks in the Dow Jones Wilshire U.S. Large-Cap Index. RBP probability scores are calculated by Transparent Value for each of the 750 companies in the Dow Jones Wilshire U.S. Large-Cap Index. The 30 stocks with the highest RBP probability scores become components of the Dow Jones RBP Large-Cap Leading 30 Index, and the 30 stocks with the lowest RBP probability scores become components in the Dow Jones RBP Large-Cap Lagging 30 Index. Components for the Dow Jones RBP Large-Cap Leading and Lagging 30 indexes are subject to a screen that requires components to have a three-month average daily trading volume of at least $2.5 million.

The Dow Jones RBP Large-Cap 130/30 Index measures the performance of the 750 stocks in the Dow Jones Wilshire U.S. Large-Cap Index as well as an additional 30% long position in the Dow Jones RBP Large-Cap Leading 30 Index and 30% inverse exposure to the Dow Jones RBP Large-Cap Lagging 30 Index, the announcement explained. The Indexes are rebalanced on a quarterly basis.

The Dow Jones RBP Large-Cap Growth 130/30 Index and Dow Jones RBP Large-Cap Value130/30 Index are also available and follow the same methodology as the broader index. They are derived from the Dow Jones Wilshire U.S. Large-Cap Growth Index and Dow Jones Wilshire U.S. Large-Cap Value Index, respectively.

More information can be found at www.dowjonesRBP.com.

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