U.S. Savings Rate at Decade Low

It has been reported that the U.S. savings rate is at its lowest in a decade. An analyst attributed this to the fact that U.S. households’ net worth is at a record high of 670% relative to disposable income. I don’t buy it!

Sure, housing and the stock market gains will have provided paper profits for a subset of Americans, but the median American continues to struggle.  In fact, leverage levels are escalating for the lowest earners (not surprising), who have not enjoyed much, if any, wage growth in the last couple of decades. Leverage ratios are at or near the highest levels for the “bottom” 80%.

With escalating healthcare, education, and housing costs, why do we think that our lower wage earners have the disposable income to fund a defined contribution plan? Let’s finally understand that DC plans should be supplemental savings vehicles for wealthier Americans, as they were originally designed for, and not the primary retirement vehicle for most Americans, especially lower wage earners.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s