How Much Are Americans Saving for Retirement?

The keen-eyed Arnold Kling is skeptical of the claim that $63,000 1992 dollars is more than the "optimal" median life-cycle savings for an American in his or her 50s in 1992:

EconLog, Saving for Retirement, Arnold Kling: Library of Economics and Liberty: John Karl Scholz, Ananth Seshardi, and Surachai Khiatrakun write,

We find that over 80 percent of HRS households [a sample of households aged 51-62 in 1992] have accumulated more wealth than their optimal targets. These targets indicate the amounts of private saving households should have acquired at the time we observe them in the data, given their life cycle planning problem and social security and defined-benefit pension expectations and realizations. For those not meeting their targets, the magnitudes of the deficits are typically small.

This sounds like wonderful news, for it suggests that Americans are saving plenty for their retirements. But the median net worth in the data is $102,600, which does not impress me. The median "optimal" net worth as calculated by the authors is $63,116, which impresses me even less. Maybe there is a good case to be made that $63,116 is plenty of savings for the median household in their fifties...

Fourteen years of inflation and real income growth since 1992 means that $63000 then bears the same relation to GDP per worker that $110,000 does today. Consider that that median household has (blowing everything up by nominal income worker growth since 1992) has the equivalent of today's $188,000 in Social Security wealth and $66,000 in defined-benefit pension wealth. It's really not $63,000 that Arnold Kling should be thinking of as the SSK target: it's $364,000.

And the median American household in its fifties is not that rich, not living that well, and should be rapidly building its assets for retirement. My instinct is to share Arnold's skepticism about SSK's results. But I am not at all sure my instincts are correct here.