American Capital Planning Blog

ACP Blog, created by Bonnie Ashby Sewell, CFP®, CDFA™, AIF®

Save U.S. (or US)

Save 300x167Let’s meet two smart ladies, Grace and her best friend Anna. Both 25, they’ve begun working after college and Grace earns $45,000/year while Anna is hitting it out of the park earning $65,000/year. Grace and Anna have a lot of fun together especially when they’re shopping. But recently, Anna noticed that Grace is less fun and doesn’t want to shop like she used to. Neither knows what the other one earns or spends but we do. We can see that Grace spends $2,000/month and lives with an older sister, while Anna spends $4,000/month and carries a balance on one of her department store cards. They’ve each talked about saving more but only Grace has actually begun to do so. She manages to save 20% of her gross income or $750/month. Anna says she’ll start saving in a few years when she hopes to earn even more. Grace misses having new things and shopping with Anna but she has seen her parents struggle with not having saved enough and doesn’t want that experience.

Fast forward to 2020 and Anna is now earning $78,000 while Grace has improved her earnings to $55,000. Anna doesn’t have any savings but is willing to start. Grace has consistently saved $750/month for the last five years, earned an average of 7% on her invested savings and now has $53,699 in savings.

What is the history of savings rates for Americans? From the late 1950’s through the mid-1980’s, the monthly savings rate ranged from 8% to sometimes more than 14%, with the standout month of May 1975 at 17%! Then began a slide that continues today to 5% but has been as low as 1.9%.

Is it just those crazy kids that aren’t saving as much as we’d like to see? Nope. It’s pretty much everybody. With 10,000 boomers turning 65 every day for the next 15 years or so, we’ll get an up close and personal look at how much everybody saved. It isn’t likely to be pretty. The Employee Benefit Research Institute 2013 study showed (, for workers older than 55 more than 58% have less than $100,000 saved for retirement, and 24% have less than $1,000 for the same purpose.

According to the National Academy of Social Insurance (, for 65% of those receiving Social Security it is more than half of their income and for 36% it is all or nearly all their income, which indicates they had no savings at all to draw from.

Risk it now suggests we commit to thinking very differently about saving. Investing returns can almost never overcome a lack of savings. They can enhance your savings for sure, but overcome a lack of savings? That’s delusional and yet, a common belief. Our blog will focus on SAVINGS, its twisted sister, SPENDING, INVESTING, GOAL PLANNING, AND LIFE because we believe as Von Goethe said, “Things which matter most must never by at the mercy of things which matter least.” Let’s focus on what matters.


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Thursday, 23 March 2017
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