Pension Accounting & Personal Saving

Boston College CRR-JTF Working Paper No. 8

4 Pages Posted: 31 Aug 2005

See all articles by Annamaria Lusardi

Annamaria Lusardi

George Washington University - Department of Accountancy; National Bureau of Economic Research (NBER)

Jonathan S. Skinner

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Steven F. Venti

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: April 2003

Abstract

In the past two decades, the personal saving rate in the United States has declined dramatically, from 10.6 percent of disposable personal income in 1984 to a low of 2.3 percent in 2001, before bouncing back to 3.9 percent in 2002 (U.S. Department of Commerce, 2003). There is considerable debate over the reasons for this decline in the personal saving rate, as calculated by the National Income and Product Accounts (NIPA), as well as its usefulness as an indicator of saving. Many observers have questioned the influence of stock market wealth on conventionally measured personal saving rates and have noted three major ways in which the stock market and saving may be linked.

One way in which the stock market can affect personal saving, which is the focus of this brief, has to do with the treatment of pension plans in the NIPA. We show that dramatic swings in asset markets have perverse effects on the personal saving rate. Indeed, according to the official NIPA accounting rules, the entire retirement saving sector contributed nothing to measured personal saving between 1996 and 2000.

The analysis discussed in this piece covers the years 1988-2000, a time when the stock market was booming and personal saving rates were dropping. While the conditions have reversed with the onset of the bear market in 2000, understanding the experience of the 1990s offers key insights into what is happening today.

Keywords: Saving, income, stock market, pension

Suggested Citation

Lusardi, Annamaria and Skinner, Jonathan S. and Venti, Steven F., Pension Accounting & Personal Saving (April 2003). Boston College CRR-JTF Working Paper No. 8. Available at SSRN: https://ssrn.com/abstract=556793 or http://dx.doi.org/10.2139/ssrn.556793

Annamaria Lusardi (Contact Author)

George Washington University - Department of Accountancy ( email )

George Washington University School of Business
Washington, DC 20052
United States

HOME PAGE: http://business.gwu.edu/profiles/annamaria-lusardi/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jonathan S. Skinner

Dartmouth College - Department of Economics ( email )

Hanover, NH 03755
United States
603-646-2535 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
603-646-2535 (Phone)

Steven F. Venti

Dartmouth College - Department of Economics ( email )

6106 Rockefeller Center
Hanover, NH 03755
United States
603-646-2526 (Phone)
603-646-2122 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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