Tags: U.S. | Savings | Rate | Falls | Near-historic | Low

U.S. Savings Rate Falls to Near-historic Low

Wednesday, 03 August 2005 12:00 AM

For the first six months of this year, the nation's savings rate averaged 0.4 percent, which means Americans spent 99.6 percent of their after-tax earnings.

Based on the June rate, Americans earn $9.055 trillion after taxes annually but save only $1.9 billion, according to the Commerce Department.

The low savings rate is worrisome for several reasons. For one thing, it raises alarms about the baby boom generation – which is now in its prime savings years – and boomers' ability to prosper in their retirement.

Also, savings provide the pool of money from which businesses borrow from banks to finance the investments that help businesses grow, and the deficit-plagued federal government is soaking up a large portion of the available cash that would normally be available for investments with massive borrowing.

Andrew Tilton, an economist at Goldman Sachs said rising home prices have made homeowners feel wealthy and encouraged them to spend more while saving less – and in many cases, to fund their spending by refinancing.

"People expect the housing market to keep rising," he said. "It won't."

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For the first six months of this year, the nation's savings rate averaged 0.4 percent, which means Americans spent 99.6 percent of their after-tax earnings. Based on the June rate, Americans earn $9.055 trillion after taxes annually but save only $1.9 billion, according to...
U.S.,Savings,Rate,Falls,Near-historic,Low
180
2005-00-03
Wednesday, 03 August 2005 12:00 AM
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