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Chapter 2. Saving for Retirement > The Current State of Retirement Savings—We'r...

The Current State of Retirement Savings—We're Just Not Saving Enough!

By some estimates, the personal savings rate in America has dropped to as low as 1 percent of income in recent years. This is down from approximately 8 percent in 1980, 5 percent in 1993, and 2.2 percent in 1999, and it is a frightening statistic. We save half as much as the Europeans and one-third as much as the Japanese. Not only is the trend bad in relative terms, in absolute terms, it means most people today will have to either work longer to achieve their retirement goals or sacrifice quality of life during retirement. Some will have to do both.

In November 2002, the USA Today lead story in the Money section was titled “More Workers Say No to 401(k) Plans.” In the article, the writer pointed out that fewer employees are participating in their employer-sponsored plans, and those who are participating are contributing less and less. This is partly because of the problems resulting when Enron loaded up its employees' 401(k) plan with Enron stock and partly because of the economic conditions during this period. Either way, it is impacting people's retirement, in terms of when they can retire and the quality of their life in retirement.


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