Much has been made of the poor savings habits of Americans. For the first time since the Depression year of 1933, the nation racked up a negative savings rate in 2005, according to a Commerce Department report in January. A.G. Edwards offers its own, rosier, calculation of American savings with its latest “Nest Egg Score.”
According to the St. Louis-based full-service brokerage firm, Americans are doing a “fair” job of saving for retirement. The firm gives the country a fourth-quarter 2005 nest-egg score of 648 on a scale between 450 and 850. A score below 550 is “poor,” above it “fair,” above 650 “good” and above 750 “excellent.” The nest-egg score is based on 12 factors gleaned from quarterly data, including changes in housing and investment values, participation in retirement plans, cost of living and consumers' projections about their saving and investing prospects. The score shows that “Americans' nest eggs are getting a boost from real estate appreciation and stock and bond gains, but are being dragged down by poor savings behavior,” says Sophie Beckman, an AGE financial-planning specialist.
Other findings from the survey that collected the information for the score found that 58 percent of pre-retiree respondents say they do not know how much money they will need to retire comfortably. Fifty-five percent of all respondents said day-to-day living expenses are the biggest obstacles to saving; 48 percent said it was small income; 28 percent said it was debt; 24 percent said it was the cost of raising children; and 21 percent said medical expenses. Only 35 percent of respondents said increased after-tax savings was a high near-term priority. Seventeen percent said boosting pretax savings in an employer-sponsored plan was a priority.