Survey Says: You're Doing a Good Job of Saving!
February 16, 2010
A recent poll by MoneyRates.com and GetRichSlowly.org found that visitors to those sites appear to be doing much better than the national average when it comes to saving money. This is a much-needed sign of optimism when US savings rates are critically low.
National Savings Rates Are Lacking
According to the latest data from the US Bureau of Economic Analysis (BEA), the average American household saved just 4.6% of disposable personal income in the fourth quarter of 2009. This is not a savings rate that would build a very substantial retirement nest egg.
At a 4.6% savings rate, a person earning $50,000 per year could save for 40 years and still accumulate an amount worth the equivalent of just $206,455 when adjusted for inflation. This assumes the person's income grows at a 3% rate of inflation, and that the savings earn an average annual rate of return of 7%.
$206,455 may sound like a decent amount of money when it's all in one lump sum, but when stretched over a retirement period of 20 years or so, it would be woefully inadequate.
MoneyRates.com Poll Respondents Show Much Better Savings Rates
If the results of the recent MoneyRates.com/GetRichSlowly.com poll are any indication, most of you who visit this site are en route to a more comfortable retirement: 1,629 people responded to the poll, of which 30% reported saving 25% or more of their monthly income, and 34% reported saving between 10% and 25%.
In total, that means 64% of poll respondents save at least 10% of their income. Under the same conditions as the example described above, a person saving 10% would accumulate the inflation-adjusted equivalent of $448,815 after 40 years of savings. For the 30% who report saving 25% or more, the outlook is even rosier. Under the same conditions, the retirement nest egg would be the inflation-adjusted equivalent of $1,122,038 after 40 years.
Keep Working On Those Savings Rates!
Again, these poll results are encouraging, but there is always room for improvement. After all, 24% of poll respondents reported savings rates between 0% and 10%; 9% of respondents reported saving nothing at all of their monthly income, and 4% had negative savings--that is, they are slipping deeper into debt each month.
Personal finance sites like MoneyRates.com and GetRichSlowly.org aim to help improve savings rates by providing regularly updated content about how to build your wealth: from new ideas to add to your money-saving strategies to regular reminders about the basics of saving money, as well as how to save smartly (for instance, looking for the best savings account rates). After all, building your savings rate depends on effective daily habits, so constant reinforcement is critical.
You can also find reinforcement and new ideas by participating in programs like America Saves Week, held this year from February 21 through February 28. America Saves Week aims to get individuals to improve savings rates. It comes down to the same thing--not only raising awareness, but keeping awareness levels high so that good savings habits become part of the daily lives of more Americans.
MoneyRates.com plans to conduct this savings rates poll from time to time in the future. The recent results are encouraging, and even better, they could be a great starting point to build from going forward.
