Renewed Attention on Savings Rates

National Save for Retirement Week starts October 18th, and it is a good reminder for Americans to take more personal responsibility for their savings rates.

Underlying many of the hard-luck stories from the recent financial crisis is a consistent theme: too many people exposed themselves to possible setbacks by not building up enough of a savings cushion. There may be others to blame, but ultimately many people could have done more to protect themselves.

In conjunction with National Save for Retirement Week, it is important to remember that saving for retirement is a personal responsibility. You might get some help from the government and your employer, but ultimately the person at the controls is you.

So, let's use this occasion to address two common excuses for not saving more:

Excuse #1: "I don't have to worry -- retirement is a long way off."

The fact that retirement is a long way off should actually be motivation to save more now. Compounding is more powerful with time, and so the savings you make early on will bring you the greatest return by retirement.

Excuse #2: "Savings account interest rates are too low to be worthwhile."

You can't control bank rates, but you can control your own savings rate. Technically, the lower bank rates are, the more you should save, but here's the real important point. Saving for retirement is a long-term process. Between now and retirement, you'll see interest rates low and you'll see them high. The idea is to build up some savings so you can really benefit the next time they are high; if you simply wait to start saving once they are high again, you'll have very little money put away to benefit from those rates.

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