Saving and Investment | |
Do We Save Enough? |
With the oldest baby boomers turning 50 this year, a recent study warns that middle-aged Americans need to triple their rate of retirement saving to live securely in their golden years. Merrill Lynch and Co.'s fourth annual "Baby Boomer Retirement Index" -- a ratio that measures how much someone needs to save to maintain current living standards later -- hasn't budged from last year's 36 percent. But some policy-makers question whether the 76 million Americans born between 1946 and 1964 are justly blamed for not saving more when costly government programs -- such as Social Security and Medicare -- are handing wealth to the elderly, who tend to consume more, at the expense of boomers and other Americans, who tend to save more. In 1975, the nation's personal savings rate was 9 percent of disposable income. But by 1994, it had dropped to 3.8 percent. And, although the lifetime net tax rate for someone born in 1900 was 23.6 percent of earnings, it climbed to 36.2 percent for someone born in 1992, according to a study by Laurence Kotlikoff and Alan J. Auerbach. Others say there are some signs boomers aren't complete slackers when it comes to saving. According to a study from the Congressional Budget Office: Median wealth of households headed by someone aged 25 to 34 years was $9,000 in 1989 -- compared to $6,100 in 1962, stated in 1989 dollars. The median wealth of households headed by someone 35-44 was $54,200 in 1989 -- compared to $29,300 in 1062. Researchers warn that unless government social spending programs are cut soon, there is the very real prospect that higher taxes and program cuts will be inescapable just as the baby boomers reach retirement. Source: Laura M. Litvan, "Are Baby Boomers Lousy Savers?" Investor's Business Daily, June 18, 1996. |
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