The study, How Much Are Workers Saving?, authored by Alicia Munnell, Francesca Golub-Sass, and Andrew Varani for the Center for Retirement research at Boston College, argued that The US National Income and Product Accounts (NIPA) needs to be revamped to give analysts the best savings data. The report said that NIPA has fallen dramatically in recent years to the 1.8% of disposable income as of 2004.
One big potential stumbling block is the fact that NIPA also factors in savings and spending patterns of retirees – a problem the authors label “confounding.” That is because, the authors asserted, that NIPA combines the savings patterns of working age Americans with those of retirees who generally are in a spending phase of their lives for items such as health care.
“The very structure of the accounts virtually ensures that the NIPA saving rate for the elderly will be negative, ” the authors claim. “Specifically, the NIPA includes all contributions and interest and dividend income in employer pension plans, including 401(k) plans, in personal income. Benefits paid from these plans on the other hand are not included in the income of retirees but are treated as a drawdown of accumulated savings. That is, much of the money that funds the current consumption of the elderly is not counted as current income.”
To get a better picture of savings, data on retiree saving should be separated from that focusing on the working age population, the study claimed.
The authors also argued that at least a portion of business savings should be included in the NIPA data to give a more accurate picture of the resources available for Americans when they stop working full time. “Focusing only on the personal saving rate understates the extent to which households are squirreling away nuts for tomorrow,” the authors wrote. “Saving by business adds to personal wealth since households are the ultimate owners of business assets.”
The study concludes: “So including business saving produces a better estimate of saving for retirement by the working age population within the NIPA framework. “
A copy of the study report is here .
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