Monday, June 25, 2012

China: Recessions take toll on American savings

 Xinhua News

For young U.S. families, savings rates ever lower amid ailing economy   2012-06-25 06:00:45            
WASHINGTON, June 24 (Xinhua) -- Cash is slipping like sand through young American families' fingers at a growing clip, with savings rates lagging behind previous generations amid a moribund economy, U.S. experts said.

"This is particularly worrisome because younger families were falling behind earlier cohorts even before the Great Recession," said Monique Morrissey, economist at the Economic Policy Institute.

Indeed, the U.S. has seen a recession roughly every ten years in recent decades, which caused young families to lag behind in savings well before the 2007 economic downturn.

"Households in the 35-44 and under-35 age groups suffered declines in the wake of two previous recessions without fully regaining the lost ground in the intervening years," she said.

Families headed by someone age 35 to 44 had seen declines in net worth after two previous recessions -- 1990-91 and 2001 -- without fully regaining the lost ground.

Losses are sizable. Those between 35 years old and 44 years old -- the age when families start getting serious about saving for retirement -- saw a 54 percent drop between 2007 and 2010, noted Morrissey.
Indeed, that group's rate of loss is considerably higher than that of the typical American family, who saw their net worth fall 39 percent -- from 126,400 U.S. dollars in 2007 to 77,300 U.S. dollars in 2010 -- over the last three years. The decline was sparked when the housing bubble popped in 2007 and sent the world' s largest economy reeling.

Oddly, however, savings losses before the Great Recession happened during times of unprecedented growth in the U.S. economy, and the fact that net worth declined for these younger age groups between 1989 and 2010 is "remarkable" amid an economy that grew by a third on a per capita inflation-adjusted basis over that period, Morrissey said.

Also alarming is that younger families should have been saving more to make up for declines in employer-provided pensions and social security benefits, she said.

The financial meltdowns that came before the Great Recession only exacerbated an existing problem, as Generation Xers (those who were born from early 1960s to early 1980s) in 2010 had socked away less than half what Baby Boomers saved at the same age adjusted for inflation.

The Center for Retirement Research has estimated that the average family in the broad 35-64 age range had a retirement income deficit of 90,000 U.S. dollars in 2010, a measure of how far behind they were in saving and accumulating benefits for retirement.
Editor: Mu Xuequan

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