Pension Accounting & Personal Saving
In the past two decades, the personal saving rate in the United States has declined dramatically, from 10.6 percent of disposable personal income in 1984 to a low of 2.3 percent in 2001, before bouncing back to 3.9 percent in 2002 (U.S. Department of Commerce, 2003). There is considerable debate over the reasons for this decline in the personal saving rate, as calculated by the National Income and Product Accounts (NIPA), as well as its usefulness as an indicator of saving. Many observers have questioned the influence of stock market wealth on conventionally measured personal saving rates and have noted three major ways in which the stock market and saving may be linked. One way in which the stock market can affect personal saving, which is the focus of this brief, has to do with the treatment of pension plans in the NIPA. We show that dramatic swings in asset markets have perverse effects on the personalsaving rate. Indeed, according to the official NIPA accounting rules, the entire retirement saving sector contributed nothing to measured personal saving between 1996 and 2000. The analysis discussed in this piece covers the years 1988-2000, a time when the stock market was booming and personal saving rates were dropping. While the conditions have reversed with the onset of the bear market in 2000, understanding the experience of the 1990s offers key insights into what is happening today.
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- Zvi Bodie & John B. Shoven & David A. Wise, 1988. "Pensions in the U.S. Economy," NBER Books, National Bureau of Economic Research, Inc, number bodi88-1.
- B. Douglas Bernheim & John B. Shoven, 1985.
"Pension Funding and Saving,"
NBER Working Papers
1622, National Bureau of Economic Research, Inc.
- Alicia H. Munnell & Annika Sunden & Elizabeth, 2002. "How Important Are Private Pensions?," Issues in Brief ib-8, Center for Retirement Research.
- A Lusardi & J Skinner & S Venti, 2001.
"Saving puzzles and saving policies in the United States,"
Oxford Review of Economic Policy,
Oxford University Press, vol. 17(1), pages 95-115, Spring.
- Annamaria Lusardi & Jonathan Skinner & Steven F. Venti, 2001. "Saving Puzzles and Saving Policies in the United States," JCPR Working Papers 220, Northwestern University/University of Chicago Joint Center for Poverty Research.
- Annamaria Lusardi & Jonathan Skinner & Steven Venti, 2001. "Saving Puzzles and Saving Policies in the United States," NBER Working Papers 8237, National Bureau of Economic Research, Inc.
- Ippolito, Richard A, 2001. "Reversion Taxes, Contingent Benefits, and the Decline in Pension Funding," Journal of Law and Economics, University of Chicago Press, vol. 44(1), pages 199-232, April.
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