Think you're doing pretty well with your saving? Feel like the smug saving Gallant to your hapless friends and family's sad Goofus? Get ready to be humbled.
I came across a post on Reddit's Personal Finance subreddit (which I'd highly recommend checking out) about how you should check your lifetime earnings on the Social Security website -- not for retirement-planning purposes, but just as sort of a "gut check" to see how you're doing. The really interesting part was the post's comments, in which there was much gnashing of teeth and rending of garments as people found out they'd made a good living for many years and barely had anything to show for it.
Because I hate myself, I decided to figure out my lifetime savings rate -- how much I have managed to hold on to and grow as a percentage of the money I've earned working. To get it, I added up the balance of my financial assets -- my retirement and conventional accounts, but not my home equity -- and then divided it by all the money I made working, from when I started filing tax returns in 1999 until the end of 2015.
I think thought of myself as a pretty diligent saver, but even with the wind of compounding interest and dividends at my back, my lifetime savings percentage is just over 11%. Meanwhile, the rule of thumb is retirement saving alone should be 10% to 15% of your income, and that doesn't count saving for stuff like an emergency fund or your kids' educations.
One mitigating factor: the earnings numbers on the Social Security website are pretax, so it's important to keep that in mind when deciding on the level of self-flagellation you're going to undertake after taking the now officially named #LifetimeSavingsChallenge.
I can think of a lot of reasons I'm not quite where I'd like to be savings-wise -- my wife and I have put a lot of our financial assets into our home; the average cost of raising a child is projected to be $245,000 apiece and I have three of them. But I'm actually doing pretty well compared with many Americans. The personal saving rate is currently 5.4%, about half of what I've averaged, and that's as a percentage of after-tax income.
I'd be interested to hear how some of you are doing on this metric. Feel free to share the results of your #LifetimeSavingsChallenge in the comments or on Twitter @claesbell.
"how are you saving money?"
me: well mainly I don't go outside
— amber discko ♡ (@amberdiscko) June 5, 2016
No help for savers from the Fed
The disappointing May jobs report has probably, for this meeting at least, made a rate hike very unlikely. That report came just a week after high-ranking members of the Fed, including Chair Janet Yellen, floated a summertime rate hike. In a public appearance this week, Yellen sounded somewhat optimistic about the U.S. economy but was still carefully hedging her words on future rate hikes, saying only they "are likely to be appropriate" over an unspecified time frame. The Chicago Mercantile Exchange, which runs a market in Fed rate futures, has the implied probability of a hike at 1.9% as of Wednesday morning, down from 33.8% after Yellen spoke on May 27. That's sad news for savers, who typically benefit from a higher federal funds rate, although they have yet to see much benefit from the December rate hike, according to Bankrate's national rate data.
Fed watching steps: 1 Don't actually listen 2 Form strong opinion based on ensuing price action 3 Complain 'the Fed just doesn't get it' — Mark Dow (@mark_dow) June 6, 2016
Other stories I found interesting
- More than half of Swedish bank branches no longer keep cash on hand or take cash deposits, as everyone's favorite discount-furniture peddlin' social democracy hurdles toward a cashless future. Will America follow suit?
- I kvetched a little bit last week about how hard it is to switch bank accounts, even when your account is under siege from hackers. Well, banks in the UK are moving toward an Open Banking Standard, which would allow them to share customer information more quickly and easily so that switching accounts would be less reminiscent of a root canal.
- JPMorgan Chase CEO Jamie Dimon has opinions about your candidates (that they're bad, which a lot of people would probably agree with) and opinions about your opinions, specifically that you're being manipulated by media ne'er-do-wells and that you should think for yourself.
But what I'm interested in are your opinions. Did you dare to take the #LifetimeSavingsChallenge? Will they have to pry cash from your cold dead hands?