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April 08, 2010


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"People are really saving $2,600 a year for retirement? Do they plan on retiring at 150 years old?"

No. Even just the fact that the estimated amount of savings due to it was smaller than the average amount being saved for college should have tipped you off. The National Savings Rate is calculated like this:

Income - Federal taxes - Expenditures= Savings

My understanding is that 'income' in this expression doesn't include pre-tax numbers like 401(k)s and traditional IRAs, so the term is already no good for the purpose the article put it to. It also doesn't include capital gains or changes in the value of property.

Then, the article fails again when it uses the savings rate to estimate what the average person is saving. The 'average' person is an amalgamation of minimum wage teenagers who are likely saving very little, college students who often have negative savings rates because they're spending more than they earn, workers in their prime who mostly have large savings rates (and uncounted retirement savings), and most importantly RETIRED people whose savings rates are large negative numbers. Those who spent their whole lives saving for retirement are now spending that money, as well they should.

It looks like I have to apologize for spreading disinformation: The BEA apparently does take into account 401k and traditional IRA savings when calculating the national savings rate, so please disregard that portion of my critique.

That said, the same sources say that National Savings Rate is the savings rate for all entities, public and private, so to some extent it doesn't matter how much of our own money we save, if the government borrows a bunch of money to finance a spending spree, the national savings rate is still going to be very low.

Hmm... I guess only married people with children can be middle class.

Since I am single with no children, I guess I don't fit into a "class".

Let me ask this... do retirement savings count toward the national savings rate?

Jessica: I was thinking just about the same thing. They have no comparable numbers for single people or those without children (children make a big difference, they are expensive).

Their figures on new cars are off by quite a ways. Average new car was $26k as of last summer. Consumer expenditure survey says average household spends $3k year on vehicle purchases.

We all know who the Upper Class are.
Everyone I have met claims that they are Middle Class.
This begs the question, which people are in the Lower Class?

Is it based upon money, intelligence, education, knowledge, breeding or what?

It's the same conundrum as the fact the almost everyone thinks they are above average and yet by definition, 50% of us are below average and 50% are above average.

Seems to me that if you can pay off your mortgage and your other debts, your net worth is likely to increase at a much faster pace than if you were dragging car payments, home payment, credit card payments, etc along.

We fit into the middle class category. We have chosen to live in a smaller home at this point and save to buy our next house with cash as we grow our family. At the same time, we have decided to drive paid for cars and not pay any interest by remaining debt free. We work to hard for our income.

Interesting article. Thanks for posting.

It is funny to me that a middle class family makes at most 123K, however they are the ones who are complaining about a tax increase for the 250K earners.

So there's an income level above which one is "upper class"? Right? Or is the next level "upper middle"?

I once read an article that said that class (esp upper) was more than income. That a plumber cannot be upper class even if he has 10 people working for him and nets $500K/yr. Thoughts?

Kelli - I don't think its funny that people from the middle class are protesting tax increases. Most people I know just want an equitable system. When we have a system where 47% of the people in our country pay no income taxes, but still receive all the services and benefits, if not more, that's not equitable. After the 250K earners are drained where’s the next tax bracket cut off? Nice class warfare rhetoric...

I think that's $4,100 saved for college *total*, not annually.

Am I wrong?

Noadi, Jessica: Add living in a major city (NY, LA, SF) to childless and single and the #s become even less relevant.

I agree Brian I think total not annual. If it is total that not alot. Maybe Im wrong too. Does anyone know?

Brian/John --

I just assumed that was annual -- the article isn't clear. If it's total, that's a very sad number...

Since there are now almost as many single-parent families headed by divorced parents as there are traditional families with 2 parents, I wonder why stats like this totally ignore them.

As a divorced women with children, my expenses are lower since I don't have a husband (I need to buy far fewer groceries, and I don't need more than 1 car).

On the other hand, since I am the sole wage earner I have to maintain a larger emergency fund, and my child care costs are probably higher than most 2 parent families because they can probably flex their schedules to cover child care more effectively than I can even when both work.

I think the child care costs are what really tips the balance to making single parents relatively "poorer" compared to 2-parent families. Also, many divorced parents don't receive even the low levels of child support from the non-custodial parents that are ordered by the courts.

Yep, definitely not middle class and won't be for a while. It's hard to measure myself against this criteria since: 1) We don't live in our own home right now, 2) we have no children, 3) we have no way of measuring home costs right now, 4) we have no health insurance... well, I think I've painted enough of a picture.

It's an interesting article, none the less. Thank you for sharing!

My family is way below the middle class designations listed below on everything (except the family size), but having said that I think most people would still consider us border line "middle class". Or if you didn't know our intimate financial details, you'd definitely say we were "Middle Class". So this was interesting.

I can't stand reports on statistical information that don't give you any way to check out the raw data.

Like how many people were surveyed. Are they excluding the top 2% of the country that drastically throws off the scale. Are they always talking about median? What does "the typical family" mean? Mean? Median? Mode? Random dice roll??

That's interesting. I think location is very important. I grew up in a small town where a person earning $25,000/year could live a middle class lifestyle. Similar earnings in a coastal city like San Francisco would be hardly scraping by.

Personally, I am worried about future tax increases. What I am worried about is keeping taxes down for the middle class in the long run. That is not going to happen if we continue to spend ourselves into oblivion (That includes spending a trillion dollars overseas).

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