Term of the Week: Savings Rate
Victor Leonel, CNPI-P, CFA Investment Foundations, MBA
PCD | Research | Modelagem Financeira | Valuation | FP&A | Riscos | Crédito | Python | CNPI-P, CEA, PQO e CFA Investment Foundations? Certificate Holder
Definition
The savings rate is a measurement of the amount of money, expressed as a percentage or ratio, that a person deducts from their disposable personal income to set aside as a nest egg or for retirement. The Federal Reserve defines disposable income as all sources of income minus the tax you pay on that income. In economic terms, saving is a choice to forego some current consumption in favor of increased future consumption, so the savings rate reflects a person or group's rate of time preference. The savings rate is also related to the marginal propensity to save.
News
领英推荐
Fidelity
Despite recent market volatility and economic challenges following the pandemic, a Fidelity analysis of retirement accounts for Q1 2022 found that Americans are saving at a higher rate than ever for retirement, with the tracked 401(k) savings rate reaching a record 14%, not far behind Fidelity's suggested annual savings rate of 15%.?And while average account balances declined from the prior quarter and a year ago, the number of IRA holders increased, particularly among young women, with the number of IRA accounts held by millennial women investors increasing over 26% from last year. Fidelity’s analysis across over 35 million IRA, 401(k), and 403(b) retirement accounts found the average IRA balance was $127,100 in Q1, a 6% decline from the previous quarter. Meanwhile, the average 401(k) balance fell to $121,700 in Q1 2022, down 7% from Q4 2021. Both were 2% lower than they were in Q1 2021. The report noted that most savers did not make significant changes to their allocations. “While the market's performance does impact account balances in the near term, consistent contributions and having an appropriate asset allocation are just as important for a successful long-term retirement savings strategy,” wrote Kevin Barry, Fidelity’s president of Workplace Investing in a release.?Data tracking continuous savers over longer periods showed how savings can grow over time. For those who had saved and invested through their company's defined contribution plan for the last 15 years, the average account balance grew to $482,939, up from $64,923 in Q1 2007.