Savings Rate - Negative or Not?

[REWahoo]

Where's a one-armed economist when you really need one...

Economists at Odds Over Savings Rates

By ELLEN SIMON, AP Business WriterSat Mar 4, 4:56 PM ET

Now that America's savings rate has been negative for an entire year, a first since the Great Depression, the question is whether we're a spendthrift nation on its way to the poor house or whether we're looking at the wrong numbers when we calculate savings....

http://news.yahoo.com/s/ap/20060304/ap_on_bi_ge/wall___main

 

[Bruce]

Not.

The government statistics do not count Money Market accounts, stocks, 401(k)s, Roths, home equity or business values. :

 

[cute fuzzy bunny]

many of those are appreciating assets, not savings. <>

 

[Bruce]

Agreed and understood.

My frustration is that the media and many people hold up one statistic and say how it is bad without given the good news.

 

[Rustic23]

In 1981 the savings rate began to drop. This is also the year IRA’s went into effect. The savings rate has been dropping ever since. If it does not include 401k’s, IRA’s and other new savings vehicles  it makes a lousy statistic to form a conclusion. See Topic: Another article on our inability to save. That topic ask some of the same questions. i.e. what makes up the savings rate?

 

[HFWR]

Of course, most data I've seen shows 401k accounts, on average, are pretty lean...

 

[azanon]

The stats sound about right to me. I know so many people that not only dont save, but have a few credit cards loaded with debt along with their mortgage, student loans, and 2 car loans.

 

[Marshac]

Oh no, not again!

 

[Rustic23]

Oh no, not again!

That was my first thought.

 

[Coach]

In 1981 the savings rate began to drop. This is also the year IRA’s went into effect.

I think IRAs started at least a few years before that. I remember trying to decide if I wanted to start an IRA around '77 or so.

Coach

 

[thefed]

That stat is as useless to us as a push up bra is to that chick in Cute n Fuzzy's avatar.

To me, it seems like a good statistic, I think it shows that we are a little bit more educated about investing options...not just letting our money sit around and gather dust.

What IS savings, per the definitions of this study?

 

[Marshac]

That stat is as useless to us  as a push up bra is to that chick in Cute n Fuzzy's  avatar.

Best analogy ever.

 

[bongo2]

Not.

The government statistics do not count Money Market accounts, stocks, 401(k)s, Roths, home equity or business values.  :

Where do you get that idea? The statistic quoted in the article (income - spending) would include investment in all those things. It would not, as it shouldn't, include appreciating assets.

I don't know if this article was ideologically driven, but their arguments against the idea of zero savings were surprisingly weak. Arguing that you shouldn't worry about negative savings because people are spending down their assets is basically saying you shouldn't worry about negative savings because it's negative.

 

[cute fuzzy bunny]

Best analogy ever.

But wouldnt you like to see it? The stat I mean...

 

[Rustic23]

Bongo,
Great pain on my keyboard as I admit to being wron………g. wow, that hurt!
http://www.bankrate.com/brm/news/sav/20001226a.asp
Seems like the initial 401K deposit is included but not the wealth accumulated. I thought over all this shed some light on the subject. Really is it not the accumulation of wealth that is important to the future of retirees? The fact that 25% may not be accumulating enough is troubling.

 

[azanon]

Oh no, not again!

Did i miss something? We just discuss that? I don't have time to read all the threads cause I work, ugh!

 

[bongo2]

"Really is it not the accumulation of wealth that is important to the future of retirees"

On an individual level, yes (or at least mostly), but on a national level, no. What's important to our future is a continued investment in our future. That doesn't come from increasing asset values.

 

[Rustic23]

On an individual level, yes (or at least mostly), but on a national level, no. What's important to our future is a continued investment in our future. That doesn't come from increasing asset values.

Ok, in that case most of the activity in the stock market, as it is trading stock from one owner to another, not IPO's does nothing. Not meant to be nasty, just an observation.

 

[laurence]

Quote from motley fool article:
http://www.fool.com/news/commentary/2006/commentary06030315.htm
Check out the RCS numbers below, which reflect the total savings and investments (not including the value of the primary residence) of today's workers, broken down by age groups:

Retirement Savings All 25-34 35-44 45-54 55+
Less than $25,000 52% 70% 50% 41% 39%
$25,000-$49,999 13% 12% 15% 14% 12%
$50,000-$99,999 11% 9% 14% 13% 7%
$100,000-$249,999 12% 5% 10% 17% 23%
$250,000 or more 11% 4% 10% 16% 19%

This doesn't give us a rate, but it does reveal that more than half of Americans have little or no retirement savings, and less than a quarter have 100k or more, so I don't think alternate piggy banks are masking the savings rate.

Note to young dreamers: Kinda cool to see how well you/we are doing compared to the average. 90% of people 34 and younger have less than 100k in their retirement accounts!