Incentives needed to
address falling U.S. savings rate: study
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[June 25, 2014]
By Moriah Costa
WASHINGTON (Reuters) -
Greater incentives including expanding private-sector
retirement programs are needed to encourage Americans to
step up saving and curb the nation's dependence on
foreign investors, according to a study released on
The household savings rate, which has been declining since 1984,
when Americans were putting aside 10.7 percent of their after-tax
income, is on track to fall to 3 percent in the 2030s from the
current 4 percent, according to an Oxford Economics study.
The British-based data analysis firm warned that Americans would
have to work longer, lower their standard of living or risk running
out of money in retirement if they didn't begin to save more.
"To create the strong investment (and) labor recovery that we want
to see in the U.S., that's going to need to be matched by savings by
U.S. households if it's going to be truly sustainable and retirees
are not in part increasing dependence on government for their
well-being," Oxford Economics Chief Executive Officer Adrian Cooper
said at a conference in Washington.
"Sadly, that's not the direction we're heading in right now," he
Lower-income households would need to save about 21 percent more
pre-tax income to support an "adequate" standard of living,
according to the study. The top 25 percent of households would only
need to save 0.15 percent more.
Unless the savings rate increases to between 5 percent and 9 percent
of gross domestic product, the United States would have to continue
borrowing from foreign investors to keep the range of investment at
an optimal 20 percent to 25 percent of GDP, the study said.
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It recommended encouraging savings through payroll deductions. While
larger companies offer 401(k) retirement plans that are funded in
part by payroll deductions, smaller firms are less likely to do so.
It also said automatically enrolling employees in savings plans
would be helpful, as would providing matching employer
(Reporting by Moriah Costa; Editing by Paul Simao)
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