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Retirement Planning > Saving for Retirement

Living with the "new normal"

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The United States may be starting to pull out of its worst recession since the 1930s but Americans of all generations, including boomers, are vowing not to return to their free-spending ways. According to a recent survey by global consulting firm AlixPartners, Americans say they plan to save an astounding 14 percent of their income when the recession ends.

Household savings rates wobbled mostly within the 7 percent to 10 percent range from the end of World War II through the early 1990s, then plunged to 2 percent or below for most of the 2000s (and hitting 0.3 percent in 2005).

The good and bad of saving too much

If Americans make good on their intentions – admittedly, a big assumption – the economic ramifications would ripple across the global economy.

A savings rate of 14 percent would suck about $1 trillion of consumer spending out of the economy, according to AlixPartners. That would devastate sectors dependent upon consumer spending such as retail and domestic and foreign manufacturing.

Boomers still have time to rebuild their net worth from pre-recession levels, and in various surveys that we’ve seen, a growing percentage say they will delay retirement until they can afford it.

Even if these findings about savings rates are colored somewhat by the emotions of the day, Americans are definitely speaking loud and clear: They believe the “new normal” for the economy going forward will be more like the distant past. Everything old is new again.

Better times ahead, we hope

What it means to financial advisors: What a difference a year makes! The past 12 months or so have been among the worst of times to be an advisor. But the years ahead could be the best of times. Even if Americans end up saving only half of what they say they will, it will push savings streams to higher levels than seen in the past 20 years.

The not-so-good news is that 61 percent of boomers say they don’t consider insurance companies, investment firms, mortgage companies, Wall Street and credit card companies to be honest and trustworthy (from the Harris Poll). Clearly there is work to be done there.

Right now, the opportunity lies with boomers, who need to save fast and furiously because the finish line of full-time employment is closing in. Younger boomers, those under 55 years old, will likely be the best short-term prospects. The challenge is to rebuild trust among boomers who are now ready to save and invest. First one to do it wins.

Matt Thornhill is founder and president of the Boomer Project ( responses and questions can be sent to [email protected].


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