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Old 02-24-2009, 07:34 AM   #41
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Harley, I tried to find out how government determines the Savings Rate. Wikipedia gives this. 'In economics personal saving has been defined as personal Disposable Income minus personal consumption expenditure. If this is correct than the Savings Rate often touted by the news and politicians is not reflective of true savings. It does not reflect IRA, 401K, Education accounts and many other forms of savings. While I searched, I could not find any charts that showed the change in savings rates with the creation of government programs to defer income from Taxes. As these programs seem to change yearly, I find it hard to place any faith in the 'Savings Rate' currently reported.

Now on a month to month basis, it may be a good comparison. A example was an article that showed that Americans were savings the decrease in gas prices rather than paying off debt. Thus measuring an increase in savings accounts i.e. banks.


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Old 02-24-2009, 07:46 AM   #42
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I've frequently heard conflicting stories about whether or not money in retirement accounts are included in the savings rate. "Disposable income" is questionable because from the stand point of taxes, for example, money moved into my 401K and HSA is not "income". The $10K moved into our two Roths for 2008, on the other hand, would be.

So what was our savings rate in '08? Depending on whether you are looking at gross pre-tax income or after-tax income, whether you include company matches to tax-deferred accounts and whether you include tax-deferred contributions and retirement accounts, it was anywhere from 11% to 52%!

"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 02-24-2009, 10:33 AM   #43
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Even if savings rates don't reflect 401(k)s et al, there are other numbers that show that American's don't save very much. I was reading Money magazine recently (I know, but I like porn) and they had a little blurb showing from a Vanguard study that of Americans nearing retirement who have 401(k)s, the average value was $50K. That's not much, even added on top of the controversial savings rate. I know a lot of people in my old j*b that didn't max out, and a number that didn't even get the match. I suspect that even if the specific statistics are arguable, the overall concept is valid. Otherwise I'd know more than 2 other ERs personally.

"Good judgment comes from experience. Experience comes from bad judgement." - Anonymous (not Will Rogers or Sam Clemens)
DW and I - FIREd at 50 (7/06), living off assets
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