Have Your Clients Really Saved Enough for Retirement?

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Financial advisers may be scratching their heads over two recent news stories that appear to be contradictory: Americans spend more than they save, yet many are saving enough for retirement.

Not long after a news report that the national savings rate for all of 2006 was a negative 1 percent, new research came out that suggested many Americans are well prepared for their golden years.

The personal savings rate does not reflect increases in the value of assets such as houses, said economist John Karl Scholz, a professor at the University of Wisconsin at Madison.

“This doesn't necessarily imply that people are plunging headlong into debt and the like," he told the Wisconsin State Journal. "I think there is a fair amount of evidence that most people are preparing perfectly adequately for retirement."

Scholz studied people born between 1931 and 1941 and found that at least 80 percent had saved enough. “People are extremely anxious about doing enough” to save, he told the Wall Street Journal. “It's possible that anxiety is misplaced.”

David Love, an economics professor at Williams College, concluded in a separate study that most Americans will have enough for retirement based on his look at the combined assets of those age 51 and older. Assets included stocks, bonds, Social Security and housing.

But the research is not dampening the alarm many finance experts feel about how much money Americans are spending. When the Commerce Department reported that Americans are spending all of their money left after taxes, and then some, it was the worst showing in 73 years.

St. Louis Federal Reserve President William Poole warned in a recent speech that people have too much credit-card debt and not enough assets: "Many households would be much better off if they had consumed less and accumulated more wealth during their working years."

And few financial advisers are telling their clients to relax about saving for retirement. They say that unlike the older people that were the focus of recent research, younger Americans will not have the same level of pensions or retiree health-care benefits. Social Security will most likely be unavailable until an older age than their parents or grandparents.

Financial planner Mary Malgoire of Bethesda, Md., told the Baltimore Sun that it makes her angry to suggest people are saving too much for retirement. "Americans generally are not saving enough. Baby boomers are overspending hand over fist."

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