Bob CollinsMaybe Americans did learn a few things from the economic collapse of 2008. An interview with an executive of Fidelity suggests so, anyway.
People are saving money. Maybe.
Perhaps that’s not good for a consumption economy in the eyes of some economists and politicians, but it seems like a pretty smart thing to do with the economy teetering again and even economic bigshots saying the R word.
In an interview today, John Sweeney, Fidelity’s executive vice president of retirement and investing strategies for personal and workplace investments, says more money is being put into the stock market than is being taken out.
The urge to save seems particularly strong among millennials.
First of all, he said, Americans are saving 2 percent more of their income than they have in the past. Second, the job market has stabilized and incomes are starting to creep up, leaving investors with more money to put in the stock market or bonds. Lastly, he believes people are taking more control over their retirement investments.
“You have the baby boomers, who when they reach 50 can catch up contributions to their retirement savings because of a raise or a bonus payment,” he said. Fidelity is also seeing millennials put more money to work. The company’s Retirement Savings Assessment study found in 2015 millennials were saving 7.5 percent of their salaries each month, up from the 5.8 percent they were putting away in 2013.
Driving the increased savings rate among this group, Sweeney said, are expectations they will live longer lives and that today’s “gig” economy will mean they will have more employers in their lifetime, though not necessarily more employee-funded retirement savings.
Despite the indication that Americans are saving more, the idea isn’t what it once was. As late as May 1975, it peaked at about 17 percent of income.
Even if they’re saving more — a debatable point — it’s generally agreed Americans are not saving enough.
The financial planning site MAINST, for example, says more than a third of Americans are on the edge.
New statistics show just 37% of Americans say they could cover an emergency expense — something around $1,000 — such as a car repair or emergency room visit, and about 30% said they would pay for it with credit cards or borrow it from family or friends.
Also, perhaps most surprisingly only 37% of Millennials — who are known much more as savers than their predecessors — said they would pay for such expenses from savings.
With banks paying next to nothing, many Americans are sending the money to the stock market — good in the long run, maybe, but a quick way to lose money in the short term, especially with MarketWatch saying today that when it comes to the market crash “we ain’t seen nothing yet.”
