* Dan Minette ([EMAIL PROTECTED]) wrote:
> Well, I just plotted the yearly series from '59, which is:
> 
> 1959 7.6
> 1960 7.3
> 1961 8.4
> 1962 8.4
> 1963 7.8
> 1964 8.8
> 1965 8.6
> 1966 8.3
> 1967 9.5
> 1968 8.5
> 1969 7.8
> 1970 9.4
> 1971 10.1
> 1972 8.9
> 1973 10.5
> 1974 10.6
> 1975 10.6
> 1976 9.4
> 1977 8.7
> 1978 8.9
> 1979 8.9
> 1980 10.0
> 1981 10.8
> 1982 11.2
> 1983 9.0
> 1984 10.8
> 1985 9.0
> 1986 8.2
> 1987 7.0
> 1988 7.3
> 1989 7.2
> 1990 7.0
> 1991 7.3
> 1992 7.7
> 1993 5.8
> 1994 4.8
> 1995 4.7
> 1996 4.0
> 1997 3.7
> 1998 4.3
> 1999 2.4
> 2000 2.4
> 2001 1.8
> 2002 2.0
> 2003 1.4
> 2004 0.8
> 
> I see a gentle rise from about 8% in '59-'63 to roughly 10% in '80 to '84
> range, with some structure during the '70s.  Then between '84 and '87 there
> is a fall to about 7%.  And then a big drop from 1993 to 2004. It is true
> that the average savings rate from '80-'84 is higher than it is from '71 to
> '75, but the difference is only .3%, well within pure
> statistics...(assuming that variations within the 5 year averages are
> random and the statistical uncertainty for the 5 year average is the
> year-by-year SD/sqrt(5).

Which is mostly irrelevant to what I said. You said the savings rate did
not start to fall until the 90's. I pointed out that your comment was
wrong.  The savings rate started to fall in 1984-1985, from 10.8% in
1984 to 0.8% today.  Surely you aren't disputing this with the data from
the link I provided and you quoted right there?

> > Incidentally, that is the time that the baby boomers should have been
> > saving a lot for their retirement.
> 
> Most folks save/saved for their retirement in their '50s and early '60s,

I wrote. "...should have been saving...". And I was referring to the
period 1985 to 2005, when savings rate was falling and the middle-range
boomers were aging from 30 to 50.

If they don't start saving until their 50's, most people cannot save
enough for a comfortable retirement. That is why all investment advisers
counsel starting to save as soon as possible, in your twenties or
thirties. Assuming a 4% annuity rate, a retiree needs to save $300K in
order to get an annual inflation-adjusted retirement income of $12K. If
they start saving every year at 25 and have an average real return of
4% per year, they need to save $3K per year to get to $300K at 65. If
they don't start saving until 50 and obtain an average rate of 3% (lower
because they need to choose a less risky portfolio because they can't
afford a big draw-down in their savings from a market crash), then they
need to save almost $15K per year to reach $300K at 65. If their yearly
gross income in their 50's is $60K then their after tax income is about
$45K and they would need to be saving about 33% of their after-tax
income.  Today, when the middle of the boomer wave is turning 50, the
personal savings rate is 0.8%. Either most boomers are expecting SS (or
a defined-benefit pension, as you say) to pay for their retirement, or
they are just not thinking about the future.

> 
> My source was in a different part of that website:
> 
> http://research.stlouisfed.org/fred2/data/PSAVERT.txt

No, it is the same. I just linked to the graph, you linked to the ASCII
data.

> One final way to look at it is to look at the averages and SD over
> time.  Over the whole time, the average is 7.3+/-2.8 years.  From '59
                                                       ^^^^^
                                                       percent
> to '92, it is 8.8+/-1.2 yeas, and from '93-'04 it is 3.2+/-1.6 years.
                          ^^^^                                   ^^^^^
                          percent                               percent

And from 1959 to 1984 the average is 9.2% with a 1.1% SD. Then after
1984 the savings rate started to fall (1985-2004 AVG=4.9% SD=2.6%). I'm
amazed you are arguing this.

> I guess there are a couple ways of interpreting it, and I can see
> eyeballing a big slide from the max in 1984 to the min in 1987 (3.8%).
> But, it becomes much smaller if one starts at 1983 (2.0%), so that
> measurement is dependant on the years picked.  But, for the '90s
> slide, you cannot almost cut the slip in half by moving the starting
> point up a year.

That is because there was a brief "notch" in 1983. However, if you look
at the graph that I linked to

http://research.stlouisfed.org/fred2/series/PSAVERT/112/Max

and imagine going backwards in time from 2005 to 1984, you see only
upward slope with a short plateau and more upward slope.  If it were a
mountain, no one would say the peak is in the 90's. The peak is in the
early 80's.


--
 Erik Reuter http://www.erikreuter.net/
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