January 31, 2006

I CAN'T EVEN FIND MY PASSBOOK UNDER ALL THESE 401k STATEMENTS AND MORTGAGE RECEIPTS:

Americans on slippery savings slope (MARTIN CRUTSINGER, January 31, 2006, AP)

Americans are spending everything they're making and more, pushing the national savings rate to the lowest point since the Great Depression. [...]

This time the reasons for the negative savings rate are vastly different. Americans are spending all their incomes and then some because they feel wealthier because of the soaring value of their homes, which for many Americans is the largest investment they own.

But analysts cautioned that this behavior was risky at a time when 78 million Americans are on the verge of retirement. The baby boomers start turning 60 this year, which means they can begin retiring with Social Security in just two more years.

Analysts said with this huge wave of pending retirements, the savings rate should be going up rather than being on a steady decline over the last two decades. The savings rate stood at 10.8 percent of after-tax incomes in 1984 and has been declining steadily since that time. It was down to 1.8 percent in 2004 before turning negative last year.


There's nothing shocking about the fact that after-tax savings have fallen in the twenty years since Ronald Reagan made 401ks and IRAs an integral part of our lives, but it is stunning that Americans had so much of their money merely "saved" at the end of an inflationary epoch during which such savings continually lost value. No wonder we all felt so poor in the late 70s.

Posted by Orrin Judd at January 31, 2006 6:26 AM
Comments

Semantics: The media's final refuge.

Posted by: erp at January 31, 2006 11:07 AM

While I worked at my former employer, I had zero after tax savings while investing 20% of my gross salary. My net worth grew quite nicely and I literally have no debt. Yet apparently I was counted as a "non-saver".

Posted by: Annoying Old Guy at January 31, 2006 12:01 PM

Same here, 18% and no debt. FWIW the only investment book I've ever read was one of Andrew Tobias's, in which he recommended that you save enough cash to cover six months' salary. So I did.

Posted by: joe shropshire at January 31, 2006 6:54 PM
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