More Financial DeBunking - The Secret Savings Accounts of Smart Americans
In early 2007 Trista Winnie, writing for NuwireInvestor said: "In 2006, Americans saved at a rate of negative 1 percent, according to statistics released February 1 by the Commerce Department, meaning they not only spent all of their after-tax income, they also dipped into their savings or increased the amount they borrowed.
The savings rate in 2005 was negative 0.
4 percent.
" We have all heard the news (unless you live under a very big rock) that we are not saving enough, not saving for retirement, not saving for emergencies, that generally America and Americans are teetering on the verge of bankruptcy.
I'm here to tell you that the evidence for this just doesn't add up.
Americans are saving at record rates, have tremendous assets put away for a rainy day and most are far from bankruptcy.
Sorry to disappoint all you fear mongers and nay sayers out there but the numbers you've been fed (and feeding to us) have been rigged.
How could this be you ask? Well, the way the government measures savings is directly at fault.
The government's numbers are calculated like this: "Personal savings rate is calculated by subtracting the amount of spending from the amount of after-tax income.
A negative savings rate means that consumers are spending more money than they have.
The personal savings rate does not account for any money gained through investments or assets.
" (nuwireinvestor, '08) There is a large pool of U.
S.
savings that does not show up in the statistics.
The smarter and more knowledgeable our average citizens have become, and the more sophisticated they get, the more choices they have and the more they continue to save.
And the less their 'real' savings shows up in statistics.
Here are some of the ways that everyday people across America are quietly saving a fortune: 1) According to some economists American's may have as much as 100 Billion dollars in currency quietly tucked away.
This is currency that has been printed but no longer shows up in currency circulation metrics...
this makes up approximately 20% of the currency available, where has it gone? It has gone into savings.
This method of savings, many people keeping their cash in envelopes stuffed in a drawer for a rainy day used to be a common way to save, some people just don't trust banks (and with the recent events in the first half of 2008...
can you blame them?) 2) Almost 60% of Americans own their own home, and while the value of their equity may rise and fall, the value of their home equity is not measured in the aggregate savings statistics.
3) According to sales data kept by large commercial coin trading companies Americans own more gold, silver and precious metal coins than any other nation (with the possible exceptions of Germany and Switzerland).
Naturally these assets aren't recognized as savings either.
4) Social Security isn't counted.
15% of an individual's wages (or a half and half match for those of us employed by large companies) go into Social Security payments all of which is (hopefully) set aside for retirement.
It takes 40 quarters of credit to qualify for Social Security at retirement age, among other things.
With the average US wage hovering around $36,000 a year this averages out to $5400 per working year times the number of years a person works, usually about 40, which is $216,000 in contributions per worker before any gains are added on by investment.
Isn't that 15% mandatory deduction another source of savings? Why isn't it counted in the savings rate? 6) Stock investment.
By conservative estimates 50% of Americans are currently invested in the stock market.
But the aggregate of their investment is not included in the government's measure of savings.
Neither are tax deferred retirement plans like Roth and Traditional IRAs, pension plans, profit sharing plans, 401Ks, medical savings accounts, 403 b7's and a plethora of other retirement account types that would look like savings to any rational individual.
$5.
8 trillion in retirement assets are in the hands of American workers, retirees and their families and held in benefit plans.
These are huge amounts of invested money and are also excluded from the government savings statistics.
7) Money Market Funds: By most estimates aggregate total cash parked in Taxable MMF's is between 3 and 3.
5 trillion dollars...
and guess what, nope these aren't counted either.
They are considered investing along with retirement plans.
So just what is being counted in the statistics? I know that the Money Market Fund I am invested in has hundreds of billions of dollars in it...
that money is what I call my personal savings and represents about 3 months living expenses, or over 10% of my gross income.
I put money in there most months, I consider it savings, my 'emergency' savings...
why isn't it being counted? After doing just a little digging, it seems plain wrong to say that Americans are suffering from a low savings rate.
Many Americans have found more sophisticated ways to save, to pile up their money for retirement, to avoid anemic bank interest rates and sidestep excessive interest charged by credit card companies...
and none of these savings show up in the government's numbers.
When measured in the aggregate, America's savings rates are fine, we may be the most affluent savers in history! If we weren't, why would so many nations be so eager to invade our markets, and are fighting over the right to sell things to American buyers? Because we've got the money to buy stuff! There is another story being told if you just look inside the numbers.
The really big question that lurks behind all of this is: Why does big government and big media work so hard at creating fear and propagating lies? I think 'big government' decided that it is somehow better for the average American to think of themselves as worse off than they really are in order to pave the way for government to design a solution.
It's an old Madison Avenue trick: create the demand and the people will buy.
The solution will probably involve taxing the "so called" fat cats who are making "windfall" profits off the stock market (read: oil traders, corporate CEO's, speculators etc...
fill in your favorite fat cat category here!) and sharing that wealth with the "people who deserve it" i.
e the average hardworking Americans who have been convinced that they need this type of help from their government, not realizing that they are themselves the targets of this "get the rich guy" mentality.
(Anyone among my middle-class readers been hit by a falling Alternative Minimum Tax recently?) I'll let you in on a little secret: many Americans are going to be millionaires by the time they retire...
I'm more worried about how the congress plans on confiscating our hard won wealth than I am concerned about not having enough at retirement.
What kind of confiscatory tax will be unleashed on all of those well mapped out retirement plans for those jackals in congress to get their share of what we all have worked so hard to gather? Do you really think that the largest transfer of wealth in history is actually going to happen without big government collecting more than they aught? Just watch what happens to the tax rates and tax laws in the next 20 years.
That will tell the story.
Sort of like time will tell.
The savings rate in 2005 was negative 0.
4 percent.
" We have all heard the news (unless you live under a very big rock) that we are not saving enough, not saving for retirement, not saving for emergencies, that generally America and Americans are teetering on the verge of bankruptcy.
I'm here to tell you that the evidence for this just doesn't add up.
Americans are saving at record rates, have tremendous assets put away for a rainy day and most are far from bankruptcy.
Sorry to disappoint all you fear mongers and nay sayers out there but the numbers you've been fed (and feeding to us) have been rigged.
How could this be you ask? Well, the way the government measures savings is directly at fault.
The government's numbers are calculated like this: "Personal savings rate is calculated by subtracting the amount of spending from the amount of after-tax income.
A negative savings rate means that consumers are spending more money than they have.
The personal savings rate does not account for any money gained through investments or assets.
" (nuwireinvestor, '08) There is a large pool of U.
S.
savings that does not show up in the statistics.
The smarter and more knowledgeable our average citizens have become, and the more sophisticated they get, the more choices they have and the more they continue to save.
And the less their 'real' savings shows up in statistics.
Here are some of the ways that everyday people across America are quietly saving a fortune: 1) According to some economists American's may have as much as 100 Billion dollars in currency quietly tucked away.
This is currency that has been printed but no longer shows up in currency circulation metrics...
this makes up approximately 20% of the currency available, where has it gone? It has gone into savings.
This method of savings, many people keeping their cash in envelopes stuffed in a drawer for a rainy day used to be a common way to save, some people just don't trust banks (and with the recent events in the first half of 2008...
can you blame them?) 2) Almost 60% of Americans own their own home, and while the value of their equity may rise and fall, the value of their home equity is not measured in the aggregate savings statistics.
3) According to sales data kept by large commercial coin trading companies Americans own more gold, silver and precious metal coins than any other nation (with the possible exceptions of Germany and Switzerland).
Naturally these assets aren't recognized as savings either.
4) Social Security isn't counted.
15% of an individual's wages (or a half and half match for those of us employed by large companies) go into Social Security payments all of which is (hopefully) set aside for retirement.
It takes 40 quarters of credit to qualify for Social Security at retirement age, among other things.
With the average US wage hovering around $36,000 a year this averages out to $5400 per working year times the number of years a person works, usually about 40, which is $216,000 in contributions per worker before any gains are added on by investment.
Isn't that 15% mandatory deduction another source of savings? Why isn't it counted in the savings rate? 6) Stock investment.
By conservative estimates 50% of Americans are currently invested in the stock market.
But the aggregate of their investment is not included in the government's measure of savings.
Neither are tax deferred retirement plans like Roth and Traditional IRAs, pension plans, profit sharing plans, 401Ks, medical savings accounts, 403 b7's and a plethora of other retirement account types that would look like savings to any rational individual.
$5.
8 trillion in retirement assets are in the hands of American workers, retirees and their families and held in benefit plans.
These are huge amounts of invested money and are also excluded from the government savings statistics.
7) Money Market Funds: By most estimates aggregate total cash parked in Taxable MMF's is between 3 and 3.
5 trillion dollars...
and guess what, nope these aren't counted either.
They are considered investing along with retirement plans.
So just what is being counted in the statistics? I know that the Money Market Fund I am invested in has hundreds of billions of dollars in it...
that money is what I call my personal savings and represents about 3 months living expenses, or over 10% of my gross income.
I put money in there most months, I consider it savings, my 'emergency' savings...
why isn't it being counted? After doing just a little digging, it seems plain wrong to say that Americans are suffering from a low savings rate.
Many Americans have found more sophisticated ways to save, to pile up their money for retirement, to avoid anemic bank interest rates and sidestep excessive interest charged by credit card companies...
and none of these savings show up in the government's numbers.
When measured in the aggregate, America's savings rates are fine, we may be the most affluent savers in history! If we weren't, why would so many nations be so eager to invade our markets, and are fighting over the right to sell things to American buyers? Because we've got the money to buy stuff! There is another story being told if you just look inside the numbers.
The really big question that lurks behind all of this is: Why does big government and big media work so hard at creating fear and propagating lies? I think 'big government' decided that it is somehow better for the average American to think of themselves as worse off than they really are in order to pave the way for government to design a solution.
It's an old Madison Avenue trick: create the demand and the people will buy.
The solution will probably involve taxing the "so called" fat cats who are making "windfall" profits off the stock market (read: oil traders, corporate CEO's, speculators etc...
fill in your favorite fat cat category here!) and sharing that wealth with the "people who deserve it" i.
e the average hardworking Americans who have been convinced that they need this type of help from their government, not realizing that they are themselves the targets of this "get the rich guy" mentality.
(Anyone among my middle-class readers been hit by a falling Alternative Minimum Tax recently?) I'll let you in on a little secret: many Americans are going to be millionaires by the time they retire...
I'm more worried about how the congress plans on confiscating our hard won wealth than I am concerned about not having enough at retirement.
What kind of confiscatory tax will be unleashed on all of those well mapped out retirement plans for those jackals in congress to get their share of what we all have worked so hard to gather? Do you really think that the largest transfer of wealth in history is actually going to happen without big government collecting more than they aught? Just watch what happens to the tax rates and tax laws in the next 20 years.
That will tell the story.
Sort of like time will tell.
