4/13/2005

Are Americans Saving Enough?

The average American saves only 1% of their income vs. 7% in the early 1990's. Americans save less than Japan, Italy, Germany, France, and Britain. Why such a low savings rate? According to the article The shift away from thrift, Americans are able to afford all their wants and needs through borrowing. Homeowners can refinance their homes and take out home equity loans to pay for their desires. The fact is however, people aren't saving nearly enough for retirement. Americans rely on the government for bankrupt pensions, social security, and welfare. Most Americans don't believe they need an IRA, or other form of retirement savings. They all believe that they will be taken care of by the government. These people need to be encouraged to save, otherwise the taxpayers, us, will be taking care of them for the rest of our lives.

4 comments:

Fred said...

I agree that we are not saving near as much as we should for the future. As unstable as government aid has been, I certainly will not rely on them to fund living after I retire. There are so many ways out there today to build on your money, such as mutual funds, or other investment plans. I, myself, have looked into investing and plan on doing it soon. Then at least I know I have control over that much of my future.

Rex said...

If people, especially our age, are in the mind set that the government is going to help them financially after they retire, they are seriously out of touch with reality. Our generation is one of instant gratification. If we want something we will do anything short of selling our souls to get it. Our parents and grandparents would save their money until they had enough to pay for what they needed; we are much more apt to purchase it on credit.

In the future the retirement age is likely to increase and there will be little to no aid from the government. If we want to retire we need to start our own savings accounts IRA’s or we maybe working well into our seventies.

Dr. Tufte said...

What does this have to do with ManEc?

Saving - no matter how important - is not a variable for which valid cross-country comparisons can be made (the data is measured differently in different countries).

Having said that, people save for a rainy day. If they save less, that is a sign they are optimistic about the future. Arguing that people should save more - without a better justification than this is what other people do - is an unsubstantiated drive for greater pessimism.

This is idiotic. How seriously do you take someone who says you are insufficiently pessimistic? How seriously do you take them if they say this over and over and over (as has been done with the savings debate)?

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