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The personal savings rate of the United States is the lowest of all industrialized countries.
In 1980, Americans' savings rate as a percentage of disposable income was 8.2%. In the late 1990s, the economy was booming. What happened to the savings rate during this period?
By the late 1990s, the savings rate had plummeted to under 1%. In fact, the government initially published a negative savings rate for the month of October, 1998. Revised figures bumped the rate back to the positive side. Through the end of 1999 and 2000, the personal savings rate hovered around 1%. (Center for a New American Dream, www.newdream.org)
The Financial Security in Later Life National Initiative through Cooperative Extension has identified some disturbing statistics:
- One-half of American households have accumulated less than $1,000 in net financial assets and $35,000 in net wealth.
- Consumer debt (SPENDING) is a significant reason for low net financial assets.
- The one-fifth of households with the lowest financial assets held, by far, the highest consumer debts, most of them unsecured (mainly credit card debt).
- A majority of Americans in households with incomes of $35,000 or less believed that they are more likely to accumulate a $500,000 nest egg by winning a lottery or sweepstakes (40%) than by patient saving and investing of relatively modest sums (30%).
DEFINITIONS
Net financial assets is the value of money in the bank, stocks, bonds and other securities after subtracting loans, credit card debts, and other secured debt.
Net wealth is the value of all real and financial assets including home equity, other real estate, vehicles, owned businesses.
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“Responsibility for retirement security in the 21st century will fall squarely on the shoulders of individual Americans. This underscores the need to save significantly more than what people currently are setting aside for their retirement.”
“Retirement Planning in the 21st Century” retirement think tank, 1999
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