WILLisms.com: Trivia Tidbit Of The Day: Part 131 -- America's National Savings Rate.

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Trivia Tidbit Of The Day: Part 131 -- America's National Savings Rate.

Rate of Savings, United States-

Americans are not saving their money. The importance of the savings rate is often overstated, but it recently hit rock bottom.

Source:
U.S. Department of Commerce.

There are a variety of reasons for this phenomenon. And a variety of ramifications. Without going into all of them, there is one overriding conclusion we can draw from America's abysmal rate of savings:

Personal Savings Accounts, as part of a comprehensive Social Security reform package, are crucial to the long-term health of our economy.

As Alan Greenspan noted:

The major attraction of personal or private accounts is that they can be constructed to be truly segregated from the unified budget and, therefore, are more likely to induce the federal government to take those actions that would reduce public dissaving and raise national saving.

Want to boost the national rate of saving?

Reform Social Security.

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Previous Trivia Tidbit: Job Growth.

Posted by Will Franklin · 7 August 2005 11:35 AM

Comments

Maybe this is obvious, but it's also true that the reason savings is so low is that many Americans are assuming that Social Security will be around to provide help after retirement. So why not spend now?

It's going to be a shocker when those benefits disappear.

Posted by: Eric Lindholm at August 7, 2005 01:22 PM

Most forms of saving are a bad idea. Certainly CDs, money market, and savings bonds are. The return is negative after inflation and tax.

If you want to boost savings then exempt the first $5000 of interest from taxes. Boost it to $10000 at age 40 and $20000 at age 50. Exempt half the tax on savings bonds held 10 years and all of it on those held 20 years.

Right now capital gains and dividends are taxed at a lower rate than interest. And selling your home is not taxed at all. So why accumulate traditional savings?

Notice that these are very easy proposals to implement and audit.

Posted by: K at August 7, 2005 03:04 PM