It is time again to report on my perpetual New Year's Resolution - to change my mind about a belief I hold strongly. Happy to report that I was again successful achieving it some time last spring. As I read and reflected upon this argument against increasing Social Security expansion and this counter-conventional wisdom post (HT: Don Boudreaux), I realized I needed to challenge myself against assuming I know what "you" or "we" need to save for retirement.
Formally presented: I have overturned my long-held and thoughtlessly repeated mantra that "typical Americans are not saving 'enough' for retirement". I should have had strong reservations about this mantra as it is a bold affront to my principles to presume that I know the correct amount people should be saving (or consuming).
The heart-breaking stories of the poor not having adequate if any savings for retirement is as misleading as looking at the Forbes 400 as a barometer of retirement preparedness. We do not and should not expect a household that finds itself in the rare but tragic condition of always being in the lowest income deciles to have retirement savings. Those are the households for which Social Security, private charity, et al. are supposed to be the safety net. To analyze the potential problem, one must look at much deeper data and analysis concerning aggregates and focusing on where households actually stand. Andrew Biggs at AEI does that exceedingly well as indicated by this post (HT: again Don Boudreaux).
Make no mistake: there is government-induced crowding out and misleading, many examples of individuals with unrealistic expectations, and bad financial decisions aided largely by government-protected culprits. But the basic belief I formerly held is not substantiated.
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