In their annual "What People Earn" issue, People Magazine gave some national numbers on general finances of Americans as well as key unemployment numbers. I thought it would be interesting to review these and let you all know my thoughts on them as well as how I'm doing versus the averages (where appropriate.) Here goes:
The national average weekly income rose 2.5%, from $598 in 2007 to $613 in 2008. Inflation increased just .1% over the same period.
This is very close to the raise I received in 2008.
The personal savings rate rose from .9% in January 2007 to 5% in January 2009.
First of all, I'm glad to see that the average is now up to 5%. Lots of progress from just a couple years ago. Second, I'm way ahead of this, saving roughly 25% of my salary each year in my 401k, non-deductible IRA contributions, SEP IRA, Coverdells, and 529s.
The average U.S. household had $10,728 in credit-card debt.
Ouch! Needless to say, I don't have any revolving credit card debt (thought I have roughly $2k charged per month that I pay off as soon as it's due.)
56% of workers received health-care benefits through their jobs.
As I've stated previously, we have an HSA at work. So far, I LOVE it.
56% of workers participated in an employer-sponsored retirement plan.
I have a 401k at work, contribute the maximum, and have done so for many years now.
National unemployment rates:
- No high school diploma—12.6%
- High school diploma—8.3%
- College degree—4.1%
And yet another reason to advance your education.
Highest unemployment by state: Michigan—11.6%
Yep, my state ranked #1 for unemployment. Think it has anything to do with education (as noted above)? Probably. Also to blame is the lagging auto industry.
Lowest unemployment by state: Wyoming—3.7%
4% raise last year, will probably give at least half of it back this year. It will be my first pay cut in 19 years on the job.
We currently save about 30% annually.
No credit card debt.
We have health insurance through our jobs.
We both have defined contribution retirement plans that are supplemented by Roth IRAs.
We both have college degrees.
I'm interested in the level of education in Wyoming vs Michigan. My guess is their economies are reflecting their respective current economic strengths and weaknesses. Wyoming has a high level of natural resources...coal, natural gas, oil, minerals etc. Michigan's economy is dominated by the auto industry. A few years ago Wyoming was in recession while the rest of the country, including Michigan was growing.
Posted by: rwh | April 24, 2009 at 03:12 PM
I'd love to see a breakdown of the stats on credit card debt in the United States. Specifically, I'd like to know what percentage of American's have some form of credit card debt as opposed to the percentage of Americans who pay it off every month. I think that would be more telling than what the average debt is (as depending on what method you use to calculate the average, it could skew the stats).
Posted by: Brian S. | April 24, 2009 at 03:45 PM
FYI: 401Ks aren't counted in the "savings rate" (which is one of the reasons I don't like how it's computed). The national savings rate is computed based on "disposable income", which is derived from after-tax income. Pre-tax savings devices aren't figured into the equation.
Posted by: Foobarista | April 24, 2009 at 05:30 PM
"non-deductible IRA contributions"
Hey, FMF, can you address why you make non-deductible IRA contributions? I've been trying to figure out what advantages they have over plain old investment accounts, and all I've really been able to come up with is shelter from creditors (which is not insignificant, but might not be worth the inflexibility). I'd be interested to hear your reasoning and learn if I've missed something.
Posted by: Sarah | April 24, 2009 at 07:13 PM
Sarah --
I may write a post on this sometime, but for now, here's the short explanation:
The earnings (dividends, capital gains, etc.) of an investment in an IRA are not taxable. So even though you forego the tax deduction for the initial contribution, earnings generate no taxes. As such, you keep more of your money and it builds up to a larger amount over time.
BTW, I only contribute to a non-deductible IRA after all my other "good" deductions are taken: 401k, SEP IRA, 529s, etc.
Posted by: FMF | April 24, 2009 at 07:43 PM
FMF, Help me please. I have $225K in savings. I am 38, married, 2 kids under 6. I contribute to my 401k for my company match, current balance there is $100k. What should I do with the $225k. I have it in savings because I am afraid to lose it and I'm afraid not to have it available if I get laid off. The layoff possibility is low but it is still on my mind. I don't know what to do. Should I go to Vanguard? If so, how much and which funds? All in the Total Market Index? Should I get a financial adviser? If so, how do I choose one. It seems like now is the time to invest but I'm nervous and unsure what to do. I also want to consider a 529 for my two kids. Thanks for any help you could give.
Posted by: Kevin | April 24, 2009 at 08:28 PM
FMF --
While the earnings to a non-deductible IRA do not generate taxes, you are basically converting long-term capital gains (15% tax) into taxable income (up to 36% tax) when you withdraw the money. Depending on one's situation (years to retirement, current and est. retirement tax bracket, etc...), a better option would be to invest in tax managed fund (or possibly an index fund) within a taxable account.
Posted by: A. nonymous | April 24, 2009 at 09:14 PM
A --
1. "depending on one's situation"
2. I do have assets/investments in taxable accounts as well.
Posted by: FMF | April 24, 2009 at 09:31 PM
A identifies one of the issues I was thinking about. I'm in the irritating situation right now of not being able to contribute to my employer's retirement plan (technically I am a "temporary" employee, though in fact I'll be there for a couple more years), which limits my options. It seems like it's difficult to get a clear answer--too many variables.
Posted by: Sarah | April 25, 2009 at 01:01 AM
FWIW, if your Michigan/education analogy were to hold true, then that would mean that Wyomingites have the best education in the country. But I don't think Wyomingites have the lowest unemployment rate b/c of their education.
Posted by: Dave | April 25, 2009 at 01:14 AM
Kevin,
Do research gold. Do research analysis of people who did predict the crisis as early as 2005 and earlier: dr Marc Faber, Jim Rogers, Peter Schiff. Natural resources, away from the US dollar, gold. In each and every crisis in the human kind history gold did good. This time is no different. US has currently the biggest debt in the history - if you divide all the private, corporate and state obligations - you end up with over $400k per person! Easy way to get rid of debt as history teaches - inflate your currency. Fed printed so far $13 Trillion to fight recession. They keep printing. Watch out for US currency and US denominated assets. Keep a little bit in physical gold, a little bit in foreign bonds (Chinese bonds rule), resource oriented companies in Asia. I don't know if you travel a lot but US looks like a poor cousing compared to Japan, Taiwan, Honk Kong, Singapore. None of the US airports looks as good as ANY international airport in these countries. None of the US highways is as good as ones in Asia. I mean - if you saved this much, spent some of it to go there for 2 weeks and see - you will know how horribly neglected everything in the US is - education, health care, infrastructure, savings. And USA is getting worse and worse each and every year while Asia is getting better and better. And their growth is based 100% on their savings. They have no debt. US is 100% funded on borrowing from Asia and none of these money have been spent on growth - everything consumed and thrown to the garbage can.
Your money, you will decide. But don't buy into US media and government bias. You worked hard for this money, make sure to see the full picture. Enough people have been listening to Wall St, experts and government already. This is time to do your own thinking. Everybody in this country has something to sell and they will talk their talk to convince you. Educate yourself and shut down TV. You will know what to do.
Posted by: Paul | April 25, 2009 at 01:25 AM
Kevin --
I'll post your question in a week or so. Stay tuned.
Posted by: FMF | April 25, 2009 at 09:54 PM
Interest statistics. I'm in California, so it looks like I'm fine ;)
I never expected for Wyoming to have the lowest unemployement rate -- weird. Sad to see that the average weekly income is $600...just shows us how unfortunate many people out there are. I don't think I would be able to live off that. I make that much alone from Finance Advisory Stop, plus income from my job. Nice post!
Posted by: Finance Gooroo | April 26, 2009 at 05:11 AM