Is negative savings rate a problem? Tony Proctor, certified financial planner, Wellesley, Mass.
By Laura Bruce • Bankrate.com

Tony Proctor, certified financial planner and president, Proctor Financial, in Wellesley, Mass., addresses the question: Is negative savings a problem?

"There's going to be a serious price to pay when housing stops appreciating at the rate it's been appreciating. It's not that people aren't saving a negative 0.5 percent; they're saving, but they're overspending. They might be putting money into their 401(k) and their IRA but they're spending all their other income plus they're taking equity out of their home. That would work OK if housing keeps appreciating, but that's not likely. They're going to have to substantially reduce their lifestyles or they'll have to stop whatever saving they're doing.

"There are people who are really doing the savings -- maxing out retirement plans at work. I'm not concerned about them. Then there's a whole other group that's putting small amounts into their retirement plans and they feel that's enough. With the amount of spending they're doing they need to put much, much more into their retirement plan so that when they retire they can maintain that lifestyle. They're causing the negative savings rate.

"A lot of people believe they'll work until they're 70 or 75. They think they don't need to max their retirement plan because they'll work for a very long time and they're in good health. Then they get to 60 and realize that they're getting tired and they think they'll retire at 62 or 65 or 66. The reality is that when they get into their later years their bodies have changed their minds for them.

"When you're 45 you're in the prime of your career and you're exactly the type of employee they want. By the time you're 60 you're lucky if you're not laid off. If you haven't taken a serious stance toward retirement savings you're in trouble.

"Go back to basics. Save 10 percent of gross income every single year. For some reason we've gotten away from feeling that saving is our responsibility. We have to save for ourselves. An emergency fund is not truly savings, it's deferral of spending because it's something we expect to spend.

"I see a lot of people who have sacrificed everything for their children. The whole baby boomer generation has a tendency to overspend on their children. They put their kids through college and now they have a couple hundred thousand on their home equity line that wasn't there before college. They don't want their children to be burdened with debt to start their life, but it's ironic because they're burdening themselves with debt."

Negative personal savings Just how serious a problem is the negative savings rate? Click on each expert's name to view his answer.

Is negative savings a problem? • Joel Naroff, president and chief economist, Naroff Economics Advisors Inc., Holland, Pa. • John Merrill, investment manager and founder, Tanglewood Capital Management, Houston • Tony Proctor, certified financial planner and president, Proctor Financial, Wellesley, Mass.