The Center for Retirement Research at Boston College has released a new Issue in Brief:
“Do Income Projections Affect Retirement Saving?”
by Gopi Shah Goda, Colleen Flaherty Manchester, and Aaron Sojourner
The brief’s key findings are:
- One barrier to saving may be ignorance about how it translates into retirement income.
- A recent study conducted a field experiment to see whether providing workers with retirement income projections affected the amount they saved.
- The results show that such projections, accompanied by information on retirement planning, could modestly increase saving.
- The experiment’s positive effect on saving works, in part, by boosting individuals’ knowledge and confidence.
- But its effect on saving is limited among those with who have difficulty paying bills, prefer to “live for today,” or tend to procrastinate.
The brief is available here.
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1 comment:
The ability to save has more to do with how much one earns and what their costs are to maintain life (food, shelter, clothing). One can live in a low cost state and make 90% of the average wage and live far better than a person who makes the same amount and lives in let us say New York City.
Studies done years ago show that those who grew up in families that saved, tend to save themselves. Parents taught children how to save. However, over the past several decades the savings rate has dropped. Is this due to how savings rate is calculated or due to actual savings rate decline?
When one looks at the economy in terms of equilibrium, one might think that a low savings rate is bad. But when I looked at how the US Savings rate is calculated I find it is the net difference between what is spend and earned.
Retired people spend savings and thus decrease the over all rate of savings. So as we age, birth rate declines, is what we see a decline in savings per person or is it equilibrium setting in?
I believe it is a combination of two major factors: age and FICA taxes. Clearly was FICA taxes went up, savings rate declined due to less take home pay yet constant cost to maintain a family. For those who meet the standard level of subsistance, their savings may be zero, but has those with wages rise above this level, their ability to save increases.
In the past 60's and 70's Government Agencies used to include FICA taxes as part of savings. This changed when it realized that these FICA taxes were consumed.
The 2% payroll holiday saw an increase in savings due partly to having more take home pay as well as paying down debt.
If you want higher saving rates, you need to reduce the tax that most affects those of average workers which is FICA.
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