Retirement Watch Lighthouse Logo
Retirement Watch Lighthouse Logo

Another View of the Savings Rate

Last update on: Mar 15 2020

The U.S. savings rate is too low. That’s been a consensus view for some time. But is it inaccurate? This post argues that it is. It argues that the personal savings rate is only part of the U.S. savings. Businesses also save, and they’ve been saving quite a bit for some time. In fact, business saving is about two-thirds of the U.S. savings. When personal and business savings are combined, the U.S. savings rate is in pretty good shape.

The U.S. saves about one fifth of gross domestic income — it saved a little more than that in the 1970s and over the last few years, a little less than that in the 1950s and the 1990s. The apocalyptic trend towards zero savings is simply not there. What appears to be a long-term decline in the savings rate is in fact a hand-off between households and businesses in who does the saving.

That savings hand-off could be for a number of reasons. Changes in tax policy may have made it more favorable for businesses, rather than households, to do the saving. Changes in trade policy may have made it more advantageous for businesses to have savings so that they can deploy that capital abroad. Changes in the income shares of labor and capital may have shifted the place where that saved income ends up.


April 2021:
Congress Comes for your Retirement Money
A devastating new law has just been enacted, with serious consequences for anyone holding an IRA, pension, or 401(k). Fortunately, there are still steps you can take to sidestep Congress, starting with this ONE SIMPLE MOVE.

Log In

Forgot Password