A Scary Statistic: Savings Rate in the U.S.
I wrote an article titled “Top 4 Ways to Improve Your Retirement Score.” It was timely because budget was one of the most common topics that our clients preferred to discuss in both December and January. A week later, I was shocked by an article published by the Bureau of Economic Analysis (BEA). The topic was the personal savings rate within the U.S. During the pandemic, the personal savings rate for the US reached an all-time of 33.8% in April of 2020. I’m going to share the current number with you, but I think it’s important to create a framework for how the BEA defines their statistics.
Personal Income: “Income that people get from wages and salaries, Social Security and other government benefits, dividends and interest, business ownership, and other sources.” Pretty self-explanatory, right?
Disposable Personal Income: “After-tax income. The formula is simple: personal income minus personal current taxes.” The money you have left after paying taxes & nothing else.
The Personal Savings Rate in December 2022 was 3.4%!!!
This means that after taxes, after paying rent/mortgage, utilities, groceries, gas, etc. The average household is only saving 3.4% of their after-tax income per month! This 3.4% also includes any amount that may be going to a 401(k), IRA, or pension!
The minimum amount an individual should be saving for retirement will be subjective based on income and expenses; however, most advisors agree that you should be saving anywhere from 10-15% of your income…at MINIMUM.
The pandemic was a strange time that most of us were not prepared for. With worldwide lockdowns it’s easy to see why savings rates would increase so drastically with nowhere to go. We commonly say that it’s our job to help clients spend and enjoy their money. Now that much of the world has opened back up many people in the US are not taking it for granted. It may be a good time to visit with your financial advisor, revisit your budget, and now how much or how little is excess.
Source:
“US Personal Saving Rate.” US Personal Saving Rate, YCHARTS, https://ycharts.com/indicators/us_personal_saving_rate
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