Personal Savings Rates - Worst Since the Depression - Or Are They?

UPDATED: A much more in depth look at this story is linked here

Every few months, we get this story from the AP:

2006 Personal Savings Drop to 74-Yr. Low

The gist is that no one in America has any money saved. To be fair, I think that too many people are spending too much of their income on things they don't need or houses that are too big. However, I don't think that this story is the harbinger of impending doom that they make it out to be.

In the story, they describe how they determine that no one is saving money:

"The savings rate is computed by taking the amount of personal income left after taxes are paid, an amount known as disposable income and subtracting the amount of spending. Since the figure has dipped into negative territory, it means consumers are spending all of disposable income and then some."

Just using my personal circumstances, I can tell you that some of my savings occurs pre-tax, meaning that none of it would be included using this calculation. Also, this figure assumes that money that comes out of my after-tax amount doesn't go into savings, just that it was spent on something with no return.

I define savings as money that is taken from today's pile and put into a pile reserved for a later date. Without giving total numbers (because it is none of your business what I make), here are my savings vehicles:

1. 401K - my contribution
2. 401K - employers contribution, not really my money, but I had to contribute to get matching funds and I get to keep the money later.
3. Roth IRAs - one each for my wife and myself
4. 529 plan - one for each of my kids
5. Health Savings Account

When the monthly amounts for each of these are totaled and expressed as a percentage of my after-tax income, my savings rate is 24%.

24% of the money I make in a given month - after taxes - goes toward future needs. While I know that not every American is taking all of these steps to save, these savings vehicles are not even considered in the calculation of personal savings as defined in the article from the AP.

Future of Savings and Retirement:
Lately, I have been making predictions. Here's another one: Baby boomers won't be retiring any time soon. While 78 million may be approaching retirement age, they simply won't be able to afford to retire. While the Commerce Department's calculation for personal savings may not show the whole picture, I believe that there are a lot of boomers who don't have the required savings to retire. Instead, they will have to work longer either at their current jobs or at other jobs.

But that's okay. It's okay because HR professionals have been fretting over the lack of workers that the baby boomer retirements would cause. If the boomers haven't got the money to retire, and still have to work, their isn't a labor shortage - problem solved!

I don't think it will work out that neat and easy, but I do believe that Americans' views of retirement, savings, and working will be dramatically altered in the next decade.