Alicia H. Munnell () (Center for Retirement Research) Francesca Golub-Sass () (Center for Retirement Research) Andrew Varani () (Center for Retirement Research)
Additional information is available for the following
registered author(s):
It is crucial that today's workers save for retirement for two reasons. First, Social Security replacement rates will decline due to increases in the Normal Retirement Age, rising premiums for Medicare, more personal income taxation, and potential adjustments to restore financial balance to the system. Second, accumulations in 401(k) plans may well be much lower than people anticipate. As such, personal saving will become increasingly necessary for retirement security. So how much are individuals saving for retirement? The standard measure, the personal saving rate reported in the official U.S. National Income and Product Accounts (NIPA), has fallen dramatically and in 2004 stood at a dismal 1.8 percent of disposable personal income. But is this indicator an accurate measure of saving behavior? The NIPA personal saving rate is a much beleaguered statistic. Economists complain that 1) consumer durables that generate services over an extended period of time (such as automobiles and dishwashers) are treated as consumption rather than investment; and 2) interest income and outlays are not adjusted for inflation. Analysts interested in retirement security bemoan the exclusion of capital gains, because these gains may help finance post-retirement consumption. This study focuses on a new issue — namely, NIPA combines the saving of the working-age population with the dissaving of retirees. This aggregation would not distort trends in saving if retirees were a constant proportion of the population, but with the retirement of the baby boom generation, their ranks will swell. As a result, even if the saving of each age group remains unchanged, the aggregate saving rate will decline. This brief thus attempts to separate the saving out of current income done by the working-age population (those under age 65) from that undertaken by retirees (those 65 and over). The first section describes the NIPA accounts. The second section estimates the share of NIPA personal saving that belongs to those under age 65. The third section broadens the calculation of household saving to include business saving.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Center for Retirement Research in its series Issues in Brief with number
ib34.
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)