When I read this lead in an article in the New York Times, I couldn't believe my eyes: "When a group of economists argued recently that Americans might be saving too much for retirement ...." This reminds me of something that I saw in a book of highlights from the Headlines segment of Jay Leno's Tonight Show, where readers send in funny headlines from newspapers and advertisements. The headline read: "Postal Service looks to deliver mail more slowly."
If Americans are indeed saving more than is necessary for retirement, is that really a big problem? With the national savings rate below zero, how can less than nothing be more than enough? According to a survey released by Fidelity Investments (in rebuttal to the argument), the average American saves only enough money to generate 58% of their pre-retirement income, less than the 65% that the economists said was a realistic estimate of how much would be required.
So who are we to believe? I would advise people to err on the side of saving more than is enough. It's kind of like a friend I have who claims to be atheist but goes to church regularly: "If I'm right and there is no god, I'll have wasted a couple hours of my time each week. If I'm wrong and don't go to church, I'll be in deep (trouble)."
One sentence that no one will ever utter during their retirement: "Ugh, I just saved too much money for this. I have no idea what to do."
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Reader Comments (Page 1 of 1)
3-26-2007 @ 8:24AM
infidel57 said...
Your friend is not a very intellectual atheist is he? If he were he would know that he is arguing "Pascal's Wager" one of the most intellectually dishonest arguments for belief there is.
3-26-2007 @ 10:16AM
beanspants said...
The US doesn't really have a 0% savings rate.
401k contributions are pretax and hence are not included in the savings rate, nor are any distributions made to your brokerage account or IRAs.
The only thing the U.S. Savings figure includes in savings is non-spent income in your checking account or savings account, which one would expect to be around 0%, because, for regular bank savings accounts at least, the interest rate is pretty darned close to 0%. I mean, i made $14 in interest in my bank savings account last year, and most of the time, the balance was above/around $1000. that's a waste to even have a savings account, since banks are sneaky with crazy fees and transfer rules.
anyways, the average person in retirement will not need the same income because their expenses should be less, ie: no house payment, no savings for kids in college, and gramps travels and buys fewer fashion items than yutes do.
finally, i agree that its better to err on the side of caution, and i'd like a few million at retirement, but to say that much is necessary is silly.