Chart of the Week: Savings as a % of Disposable Personal Income

The U.S. savings rate has plummeted since 1980, from over
10% to under 1%.

Savings as a % of Disposable Personal Income
click for larger chart


Source: Detroit News

AP reports that “every American man, woman and child” owes
$145,000. That is the cost of the long-term promises the U.S. government has
made to creditors, retirees, veterans and the poor. That doesn’t include
credit card bills, mortgages — all the debt we’ve racked up personally.


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Quote of the Day:

"All progress is based upon a
universal innate desire on the part of every organism to live beyond its
Samuel Butler

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What's been said:

Discussions found on the web:
  1. royce commented on Aug 29

    That number has to be viewed in light of the fact that the government can break promises to old people, veterans, and the poor without hurting its credit rating. All it takes is the right number of votes.

  2. Lance commented on Aug 30

    I agree that the consumer is tapped out. The only hope I see for younger Americans is the inheritance of money from their parents.

    As far as the savings rate goes, do you believe those numbers are correct? I have seen the savings rate figures like this before, but do they count 401k and stock options? I understand that this (401k) is not pure savings because of the penalties to withdrawl, but previously in our history we counted on defined benefit plans and didn’t have to worry about our own retirements. I believe that younger Americans save their money in 401ks.

    Besides 401ks, I buy stock in my company quarterly and they match with stock options. I am tied up for 2 years, but this is another part of my savings and something that I see a lot of going on.

  3. Bobby commented on Aug 30

    If we move to the Bahamas where theres no income tax we save ourselves $145k on average.

  4. Chad K commented on Aug 30

    Is there some place where we can see actual disposable income numbers? Is there a standard percentage of net income that’s used for everyone?

    I thought that disposable income meant what you had left after all your required expenses [shelter, food, transportation, health, other insurance]… which is very near zero for most of the US… seems like saving a few dollars would make that number go sky-high… that’s why i ask.

  5. Catablast! Media Group LLC commented on Aug 31

    The crux of the issue is that Americans currently find saving anathema.

    Here’s why.

    The Housing Boom, plain and simple.

    Rock bottom interest rates, along with an aging Baby Boomer generation looking for 2nd homes, has sent real estate prices to the moon.

    Did you know that nearly half of all home purchases are for second & vacation homes?

    “My home is returning me 30% — what do I need the stock market for? ” is what you’ll find most people saying nowadays.

    Well, guess what happens when they sell?

    That’s right — they have to move into an equally expensive piece of property.

    Nevertheless, Americans are overlooking this reality and thus dangerously keeping our national savings rate at a pitiful 0%.

    If every American had the discipline or wherewithal to max their yearly IRA contributions, we wouldn’t have this problem.

    The only people who will retire “comfortably” are those who are proactive enough to supplement their pension, 401K and real estate holdings with mutual funds, IRAs, and annuities.

    The future of Social Security and the pension system is anything but secure.

    And transforming your home into an ATM machine is not the answer.

    With the mortgage rate gradually climbing and the Fed aggressively bumping up short term rates well into 2006, I’d be worried.

    It goes without saying, higher rates make financing new home purchases tougher.

    So look at the third leg of the 3 legged stool of retirement (SSA, Pension, & Savings) closely.

    It may be your last hope.

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