While retirement confidence levels are low, employees are showing that they’re taking steps to financially recover from the 2008 recession and that they understand the importance of planning for the future, according to a new research report from Financial Finesse, a provider of workplace financial education.

Only 15% of employees were confident they were on track to meet their retirement goals in the first quarter of this year, down from 18% in fourth quarter 2010. The latest figure is among the lowest retirement confidence levels Financial Finesse has ever recorded.

Surprisingly, only 34% of employees were confident their investments were allocated appropriately for their time horizon and risk tolerance, even though 77% of employees indicated they understood the basics of stocks, bonds and mutual funds.

Employees are focusing on strategies to reduce debt and build savings. For example, in the first quarter of this year, 72% of employees said they had a handle on cash flow, so they spend less than they earn each month, up from 65% in the fourth quarter of 2010.

Calls to Financial Finesse’s help line addressing short-term financial issues were more proactive in nature, concentrating on budgeting, establishing an emergency fund and paying off debt. There were fewer calls about bankruptcy, eviction and other emergency issues.

“So far this year, we're seeing employees continue to further improve their money management skills, making big strides forward in areas of cash management. They also are realizing they need to focus on retirement, with 91% of employees saying they contribute to their retirement plans at work,” says Nancy Anderson, head of Financial Finesse’s Think Tank, a group of certified financial planners who research employee financial issues. “But despite this, employees are still vulnerable to being woefully unprepared for retirement.”

Liz Davidson, CEO of Financial Finesse, is optimistic about the trend toward better money management. “The good news is that it is continuing without the usual complacency that we typically see in an economic recovery. Every quarter that employees continue this momentum, the less likely they are to backslide and more likely that this is a lasting mind shift in how they manage their finances,” she says.

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