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Americans save more than we realize?
Old 05-27-2005, 10:54 AM   #1
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Americans save more than we realize?

Here's some interesting factoids from this MSN article:

"For example, money set aside in a 401(k) plan at work doesn’t count as savings because those are pre-tax dollars -– and not considered part of your "disposable income." For older, so-called defined benefit pensions, the impact is even worse on the spending vs. savings picture. That’s because income statistics are based on the employer contributions to these plans, not benefits paid out -– which is a larger number. So retirees have a lot more money to spend than the official figures take into account."

I won't try to claim that we're all saving enough or that all retirees have a lush lifestyle. But I'm shocked, shocked I say, to find that our government is manipulating savings numbers even more than the CPI numbers... th, we need a study on this!
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Re: Americans save more than we realize?
Old 05-27-2005, 12:04 PM   #2
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Re: Americans save more than we realize?

I read that article, I was "shocked" as well to see what they left out. Frankly my non IRA-401(k) savings rate is not that great either (maybe 5%).
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Re: Americans save more than we realize?
Old 05-27-2005, 12:17 PM   #3
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Re: Americans save more than we realize?

Hmm...I guess the fun phrase from that article is:

"Like most government accounting, the monthly statistics on consumer spending and savings bear little resemblance on the way the average household manages its finances."

Now that sure makes sense.

The big problem is not this particular issue on its own. The big problem comes from what I call "invalid assumption study building". I've seen people take the data, results or conclusions of several such reports or studies and use them as baseline input into their own study...poisoning the results of that study. That this is frequently done by someone who 'already knows the answer they want' and is simply cherry picking data to get them where they want to be doesnt help either.

So who in the govt and outside of it uses these numbers as input to other stuff that matters? From studies to policy decisions?
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Re: Americans save more than we realize?
Old 05-27-2005, 12:28 PM   #4
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Re: Americans save more than we realize?

A part of me tends to agree with how the government calculates the savings rate.

I still add in the equity from our house in our net worth calculation but I'm also very realistic regarding what I could get for it, even in bad economic times.....do Californians take this into account or do they imagine their homes will keep appreciating at a record pace forever?

Using the government's definition of savings, we save 25% of our gross income every year outside of our regular retirement contributions.
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Re: Americans save more than we realize?
Old 05-27-2005, 12:36 PM   #5
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Re: Americans save more than we realize?

As with anything, its often hard to agree. Heck, we couldnt even agree on the meaning of the word "is" a couple of years ago

I figure if the money is mine, I get it, keep it somewhere and I get to spend it (someday), its savings.

I do include the house in my net worth, since net worth is not a future or a past construction but a right-now construction. Today I am worth ~$400k plus my liquid assets. Tomorrow it might be $300k plus assets.

So while I may presume appreciation or depreciation, it doesnt affect my net worth even a little bit. I do realize from 'plan b' calculating that should we strike bad times, I would probably get less than $400k for it, and be waiting a while to sell it. Which is why I have plans "c" and "d", so I can use the one that makes the most sense, should it come to that.
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Re: Americans save more than we realize?
Old 05-27-2005, 12:47 PM   #6
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Re: Americans save more than we realize?

Yes, the numbers are not what they seem to be. Or maybe the "savings rate" is just a bad description of the number that it represents?!! I suspect that the college savings plans are also not included in the savings rate. What else, I wonder, is not included that a reasonable person would include?

Garbage in, garbage out...

Cheers,

Chris
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Re: Americans save more than we realize?
Old 05-27-2005, 01:22 PM   #7
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Re: Americans save more than we realize?

Quote:
Originally Posted by Grand Banks
So who in the govt and outside of it uses these numbers as input to other stuff that matters?* From studies to policy decisions?
This report has been brought to you by the same people who calculate the unemployment figures to the nearest 100,000 or so!
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Re: Americans save more than we realize?
Old 05-27-2005, 01:38 PM   #8
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Re: Americans save more than we realize?

Mmm hmm...dont get me started on the employment numbers.

Ok, you got me started.

The employment guys take (also bogus) numbers on economic expansion from another government agency. If those numbers say the economy is expanding, they presume a certain number of small businesses have been started, employing a certain number of workers, and add those numbers to offset reported lost jobs. All presumed since a lot of small business job starts arent reported.

Completely fabricated from air. Usually on the basis of an economic expansion report that says the economy is expanding at a faster rate than it usually is.
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Re: Americans save more than we realize?
Old 05-28-2005, 01:47 AM   #9
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Re: Americans save more than we realize?

The federal reserve, being a central bank, seem to want people to put more money into the banking system. People don't do this because they get ripped off by inflation and taxes. They "save" by buying a larger house, or investing in equities, which at least have some hope of keeping up with real world inflation.
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Re: Americans save more than we realize?
Old 05-28-2005, 10:57 PM   #10
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Re: Americans save more than we realize?

I remember learning about the 401(k) exception years ago ... in a comparison with European savings rates. Decided then it probably wasn't a good use of time to pay much attention to these stat's. Only thing really pertinent is how each of us is doing to plan, eh?
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