Posted on: Tuesday, December 21, 2004

Americans saving enough for retirement, study says

By Brian Tumulty
Gannett News Service

WASHINGTON — The economist who heads the Institute for Research on Poverty at the University of Wisconsin-Madison has an upbeat financial message: More than 80 percent of U.S. households are saving enough for retirement.

Many households, in fact, are saving more than they need, according to John Scholz.

Scholz, who says he was initially surprised by his findings, took an in-depth look at the finances of more than 6,300 individuals and couples born between 1931 and 1941 during the Great Depression.

Scholz and two co-authors conducted a life-cycle analysis of household wealth accumulation that looked at several decades of actual earnings as well as pension and Social Security benefits.

They also took into account the significant amount of home equity many homeowners build up as they approach retirement age.

"On balance, Americans seem to be doing a pretty good job," said Scholz, who served in the Treasury Department during the Clinton administration.

Even among the 19 percent of households that were not saving enough for retirement, the shortfall was "pretty darn trivial," according to Scholz.

Those who fell short of saving enough were more likely to be single than married, according to the study.

Scholz, whose study was published in January, presented it Friday at the conservative-leaning American Enterprise Institute to an audience of mostly congressional staff and economists from national think tanks.

One expert who critiqued the study at the forum — Jane Gravelle of the Congressional Research Service — took note of the role of Social Security and other government programs have in helping poor senior citizens.

"Without those programs, poor people would be very poor indeed," she said.

Lee Price, research director of the liberal-leaning Economic Policy Institute, speculated that those studied — because they were born during the Great Depression — might be more savings-oriented than baby boomers.

Jagadeesh Gokhale, an economist at the free-market oriented Cato Institute, said his own research runs contrary to Scholz's.

In fact, if future Social Security benefits are cut, Americans would need to significantly increase their savings, Gokhale said.

Despite the dissent, audiences are drawn to Scholz's talks because the findings run contrary to many other reports.

"It's like shooting fish in a rain barrel to find people saying that people aren't saving enough," said Scholz. The fact that young adults in their 20s and 30s don't save for retirement doesn't mean that won't change when they get older, he said.

The study doesn't offer a way for individuals or couples to calculate whether they are among the 80 percent who have saved enough.

"It's tough to translate what we are doing to the realm of personal financial advice," Scholz said.