BPC’s new Commission on Retirement Security and Personal Savings will examine the state of personal savings and retirement security in the U.S. and make recommendations on how to improve the economic circumstances of retirees. Over the next few weeks we will look at the many important measures that illustrate different aspects of savings and retirement security.
The personal saving rate has been declining in this country for many years. Although the saving rate has jumped around, the long-term trend is clearly downward. The reasons for this long-term decline are difficult to pinpoint but likely include stagnant real incomes for many workers, rising standards of living and higher consumption, and a weaker dollar than in the past.
Whatever the reasons, a long-term decline in the saving rate is a problem because it leads to reduced financial security and retirement preparedness. Moreover, there is suggestive evidence that higher domestic saving rates leads to faster economic growth in developed economies like the U.S. in the long term. Unfortunately, our saving rate has fallen through boom and bust, which raises questions about whether the present slower accumulation of savings could slow our long-term growth.
Alex Gold and Nick Peacher contributed to this post.