NCPA - National Center for Policy Analysis

Behind Those Personal Savings Rate Statistics

December 21, 1998

According to the latest government figures, Americans are spending all of their incomes and saving nothing. But economists are wary of the figures. They say the personal savings rate is one of the government's least reliable statistics.

  • The rate is calculated as the difference between overall personal income and overall personal spending -- two very large quantities.
  • Minuscule changes in either can produce huge changes in the savings rate.
  • Revisions based on more complete data sometimes alters the initial impression left by the published statistics, experts say.
  • It is even harder to interpret the data in a period when households -- especially wealthy ones -- are reporting big investment profits in the form of capital gains.

While some economists warn baby-boomers are not stashing away enough to maintain in retirement the lifestyles of their working years, Americans seem better prepared for retirement than the citizens of other countries. The net financial worth of American households equals nearly four times their income -- double that of German households.

Source: Sylvia Nasar, "Economists Simply Shrug as Savings Rate Declines," New York Times, December 21, 1998.

 

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