Saturday, January 27, 2007

Great news—we're already saving too much!

Says today's New York Times, some economists are breaking with the projections of financial planners about how much retirement capital is necessary. Our "negative savings rate" is wildly distorted, they say. In fact, a recent Federal Reserve Board study found that "88% of retirees age 51 and older had adequate wealth."

To which I say, who are these retired 51-year-olds? I know a guy who retired early from Microsoft, but that's exceptional. Including those with the resources to retire in their 50s skews the sample.

Still, the larger point is that some people may be squandering their youth instead of their money by oversaving. By some measure, the argument goes, they would do better by enjoying their money while they are younger.

Yeah, that's my philosophy. Now I'm in search of the Times piece that proves we're not really fat, either.
Posted by Jim Gust at 9:36 AM

1 comment:

JLM said...

Unless you're rich enough to retire at 39, the "spend it now" theory sounds impractical. The youngish husband and wife who should be living it up are actually each working long hours, looking after their kids and probably too busy to take even the abbreviated vacations that Americans are limited to, much less a Greek Islands cruise.

I don't believe 88% of retirees have much wealth. Nor do I believe this narrower claim in the article:

"[Economists] studies of the savings and spending habits of the generation born between 1931 and 1941 revealed that at least 80 percent had accumulated more than enough wealth for retirement. While they have not studied the baby boom generation as closely, they believe that the greater wealth of that generation should also leave those retirees secure."

And if I did believe it, the factoid wouldn't mean much. The Depression Babies born 1931-1941 were few in number and could hardly help but prosper in the great postwar boom of the 1950s and 1960s.

The Boomer generation is far more numerous and has to make its way through a more varied economic climate.

4:15 PM

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