Americans Can Save A Lot Of Money If We Want To, Don’t Worry!

During the pandemic, we learned that Americans can save a lot more money if we want to. Take a look at the historical American personal saving rate chart according to the U.S. Bureau of Economic Analysis and the St. Louis Fed.

American personal saving rate chart percentages

After lockdowns began on March 18, 2020, the U.S. personal saving rate skyrocketed from a respectable 9.3% pre-pandemic to an impressive 33.8% in April 2020! Americans suddenly decided that saving money during a time of great uncertainty was a priority. So that is what we did.

As the initial six-month shock of the pandemic began to wear off, Americans decided to lower our saving rate to 13.3% in November 2020. Then, when news of a new strain of COVID emerged in the beginning of 2021, Americans decided to increase our saving rate again, reaching 26.3% in April 2021.

Since April 2021, the personal saving rate has steadily declined thanks to vaccines, experience, and the desire for most of us to get on with our lives.

Today, the U.S. personal saving rate is around 3.1%, which is a low not seen since January 2008.

Americans Can Save More If We Want Or Need To

Since 2009, when I first started writing on Financial Samurai, I've noticed some people like to bag on the state of America's personal finances. I was one of them, with posts such as Retirement Savings By Age Show Why We're Screwed.

At the time, I thought to myself: How is it possible the median retirement savings amount for 32 – 37-year-olds was only $480 using 2013 data? Meanwhile, the median retirement savings amount for 56 – 61-year-olds was only $17,000.

Even if we quadrupled the amounts for 2023 and beyond, the retirement savings amounts aren't enough to live a comfortable retirement lifestyle.

median retirement savings by age

I got fired up to write more personal finance articles to help people save and invest more for their future. But what I realize now is I simply hadn't lived long enough to see how well people can adapt.

Almost a decade has passed and the typical retired American is not screwed. We're not hearing about a retirement crisis where 60+-year-olds are getting thrown on the streets because they don't have enough money to pay their bills.

Instead, the typical American has grown wealthier. We might not be happier, but at least as a whole we're more financially secure than in the past.

Why Are Americans Doing So Well?

Despite paltry median retirement savings amounts, the typical American is doing fine.

The majority of Americans have benefitted from an extraordinary rise in home prices since 2013. The combination of rising home prices, rising home equity, and declining mortgage balances is a huge win for the ~68% of Americans who own real estate.

Home equity - Why Americans are doing so well
Median home prices - why Americans are doing so well

For the 32% of Americans who don't own real estate, the common belief is that renters save and invest the difference. Thus, the stock percentage ownership amongst renters may be even greater than the estimated 56% of all Americans who own stock. Stocks have also had a fantastic run since the 2013 Consumer Finance Report.

Real median household income also bottomed in 2012 at around $60,000. In 2021, real median household income peaked at around $71,000.

Real median household income

Finally, both federal and state governments have been supportive during the pandemic. They've injected trillions of dollars into the economy via stimulus checks, PPP loans, and more.

Recommended Saving Percentage For Financial Freedom

Whenever someone asks me how much they should save to get to financial freedom, my default answer is 50% of your after-tax income.

A 50% saving rate means that every year you save is one year of freedom bought. Save 50% for 20 years and you've bought yourself 20 years of freedom on the back end. The math is intuitive and easy.

A more nuanced recommended saving percentage answer is to have everybody max out their tax-advantaged retirement accounts. Once that is done, save at least 20% of your after-tax, after-retirement contributions income.

Maxing out your 401(k) should become automatic. Your focus should be on building as large of a taxable investment portfolio as possible. It is your taxable investments that will spit out enough passive income so you can live more freely.

Your saving rate will be determined by your income and your expenses. But your saving rate will also be determined by how badly you want to retire early and do something new. As we've seen in the personal saving rate chart by the St. Louis Fed, we can save more if we really want to.

Financial Freedom Saving Rate Recommendation Chart

Here is my financial freedom saving rate chart from Buy This, Not That. The higher your saving rate, the sooner you will be free.

My book has plenty of charts as financial guides to help you build more wealth in a risk-appropriate way. When it comes to your money, don’t just wing it. Be all over your money.

Recommended saving rate chart by age

Don't Count Out The American Saver

No longer do I believe the typical American is going to face a difficult retirement. Many of us have the ability to save more money when situations deem it necessary. We will also rationally spend more money when we feel more secure.

Think about it. If your doctor told you there is a 90% chance you'll die within one year if you don't lose 10 pounds in the next three months, don't you think you would do everything possible to lose weight? Most able-bodied people would.

Don't count out free will!

We can also accept the new three-legged retirement stool where we rely only on ourselves for retirement. Relying on other people to save us is not a good financial strategy!

Then, when we reach a traditional retirement age, Social Security provides us with an added “bonus.” The maximum Social Security benefit is over $4,200 a month in 2023. Surely, most of us can live just fine off $50,000 a year once our homes are paid off.

We May Be Saving Too Much

For personal finance enthusiasts with above average net worths, we will likely die with too much money. A lifetime of frugality and savvy investing is hard to change. Therefore, we must work on decumulating our wealth so we don't ultimately waste our youth.

Of course, there will always be people hurting for money. But I'm confident these people will rationally take action to improve their financial situation over time.

With so many free resources online and affordable personal finance books to read, personal finance education is heading up and to the right! The average person will rationally take the right steps to improve a suboptimal situation.

Let's just hope the average person also doesn't get into revolving credit card debt. Now that would be irrational!

Personal saving rate versus credit card debt

Reader Questions And Recommendations

Readers, do you believe Americans can save a lot more money if we want to? Why do you think Americans don't save more money like citizens from other countries do? Is our low saving rate a sign of financial health? What is your personal saving rate?

In addition to buying Treasury bonds with your savings, CIT Bank also offers an attractive 18-month CD rate at 4.5%. Before the Fed started aggressively raising rates, Treasury bond yields and CD rates were under 1%. You can check out the 18-month CD here to take advantage of higher guaranteed returns.

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38 thoughts on “Americans Can Save A Lot Of Money If We Want To, Don’t Worry!”

  1. The median value per retirement account is lower than expected because people change jobs and end up with multiple 401ks.

  2. Saving and investing are consequences of financial education.

    A simple short term course on financial literacy taught to everyone would completly change this country in a decade.

    But it’s much more profitable to have charities and dumb down the average Joe and make him depend on the government programs so he is easily manipulated during the next election cycle.

  3. I don’t know Sam. I admire your optimism but I don’t fully agree with the notion that Americans can save more if they want to and are generally “fine” in retirement, despite paltry savings.

    There is a time limit to buckle down and increase savings. If you don’t get it together by say, age 55, you are probably not going to have a dignified retirement. This is especially true if you are widowed and don’t have a second generation to rely on. In her book “The Feminine Mistake” journalist Leslie Bennetts writes about the downward spiral of many womens’ finances after their husbands die. I think the figure the quoted was that 30% of widowed women fall into poverty after their husbands die. Here’s a link to a talk she gave at Google: The talk is soooo good.

    1. That is very sad is the statistic is true.

      I do firmly believe if you love your spouse, you will make them financially, independent of you. And that all partners need to keep their skills current for a potential breakup or bad luck.

      Let us rely on ourselves for financial independence. And if there is help along the way, then wonderful. And if not, will be OK because we never dependent on anybody or any institution.

      Another related post besides the two linked: Financial DEpendence Is The Worst

  4. They literally gave people money and no one had anything to spend it on. Don’t worry they going broke now.

  5. Sam, normally I agree with your conclusions, but to say that “Americans suddenly decided that saving money during a time of great uncertainty was a priority. So that is what we did.” is a laughable conclusion.

    The savings rate shot up, not due to prudence in the face of uncertainty, but largely due to a lack of traditional spending options. Suspended student loan payments, rent relief and gov’t subsidies (to a lesser extent) were assuredly a greater cause then the general public suddenly deciding to get their financial house in order.

    I always appreciate your positive view and encouragement of the masses ability to succeed, but I think you missed the mark here.

    1. Did you not have the ability to save more during the pandemic? If not, why?

      “Suspended student loan payments, rent relief and gov’t subsidies”

      These things didn’t all just happen by April 2020. They took time. Yet the 33% saving rate happened without any expectation or knowledge of any of these things.

      I wouldn’t underestimate the average American. The average person acts rationally to preserve themselves.

      1. Generally, people who say the masses are in trouble will always respond they are fine themselves.

        It’s a strange phenomenon. But the criticizes of others don’t realize they are the other people.

        The April 2020 saving data clearly shows Americans can save more if we want to. We just don’t want to bc life is generally too good and easy

        1. The Social Capitalist

          Great point. We are the others, indeed.
          So much bias in trying to use dated evidence to support a conclusion. We are all guilty of it but let’s credit our FS here for an honest attempt to evaluate the data.

  6. Hello Americans,

    I am from Australia, so take my talk over some BBQ sauce on a sanga.

    Down under we are forced to save 10.5% of our income into a retirement fund with very few exemptions. This has helped the median Australian build a massive net worth.

    The other reasoning for a low savings rate is this: perpetually rising foreign investment, rising debt and snowballing economic growth leaves plenty of American pie for the average American net worth to keep climbing, even with low savings rates. We have a similar phenomenon in Australia.

    1. The superannuation system is a great retirement savings vehicle! It is no wonder Aussies have the highest average and median net worth and highest inheritance amounts in the world!

    2. Americans are “forced” to save as well. Americans put 6.2% into social security and their employer puts 6.2% into social security.

      Americans also put 3 percent into medicare which will be bankrupt in 3 years.

      On top of that many working americans put money into a 401k. It’s somewhat forced these days as enrollment is automatic and you have to unenroll. They also pay for private health insurance and some contribute to an HSA. Some also contribute to an IRA on top.

      Between social security, medicare, 401k and hsa plans and IRA’s, it’s easy for most americans to say good bye to 20% of their pay packets and they still have no financial security. Low income americans get a 50% rebate on anything they save in an IRA. Half of American retire with nothing saved though and just wait for the government to take care of them. Seen a lot of people from hcol states like california move to states like Colorado to become a burden on their senior housing and other social programmes.

  7. I’d like to see you do an article on defined benefit vs defined contribution retirement plans, as well as, general retirement strategies for firefighters. I’m a firefighter by trade and I’d be curious to see your take on the financial and lifestyle sides of things.

      1. Can ya shoot me an email? I’d love to share and discuss. Especially if it leads to a sweet post.

  8. There’s this thing where you can put a marshmallow in front of a kid and tell them that if you come back in ten minutes and it is still there, you will give them another one. But with any group of kids, about half of them will have eaten the marshmallow by the time you return.

    That’s pretty much predictive of the way they will live out their lives.

    The only way those folks are going to have something good to eat at snacktime is if you withhold it from them until snacktime.

    1. Maybe it has more to do with socioeconomic status and not so much to do with will power. For those who are poor, there’s no guarantee the pantry will always have food, experience tells them that it’s best to get the food now while it’s in front of them. For those who are economically well to do, the pantry is always full, no big deal to wait and get that extra marshmallow.

      1. I understand what you are saying, I was left dead broke and deeply in debt after my first wife developed serious medical problems. It took many years after she passed before I could dig myself out. I certainly recall, in 1999, discovering a company called Amazon and thinking if I had two dimes to rub together, that is where I would invest it. But saving wasn’t an option for a long time.

        While any behavior, especially when shared by many millions of people, might be attributed to a a multitude of influences, and the old ‘nature vs. nurture’ argument will never be settled (because it isn’t all one or the other), it is also pretty common for both wealthy people and less well off folks to find they have children on both sides of this ‘saver divide.’

        A certain large percentage of the population will never be effective savers or investors, no matter how easy (or hard) things are for them. It’s something we, as a society have to expect and we should probably plan for it and deal with it.

        My wife and I drive used cars (no car loans) and live in a modest one-room wide townhouse (no mortgage). We buy furniture from wherever we please. We own no antiques except for a few family heirlooms, have no art collections, eschew jewelry, etc. Her father was a blue-collar worker, mine was a career serviceman in the military throughout the Viet Nam war (we necessarily ate dinner at a card table until I was in the 7th grade).

        We both worked our ways through college, have always worked for salaries, never started a company or anything like that, have had no inheritances. Yet we are multimillionaires (even without the house) and have a very nice life, if we want something we buy it, we take wonderful trips, and we are generous with our kids and many grandchildren.

        A neighboring couple with no kids has a huge house (maintained by a weekly maid service), with a fair-sized yard (maintained by a yard service), drives enormous new SUVs, came from wealthy parents (his are both Harvard educated lawyers still practicing in an extremely ritzy suburb of NYC) yet from things he has said, I am reasonably sure he and his wife still live paycheck to paycheck.

        Maybe their retirement plan is to work until they inherit a big stash from their parents? Whatever, they have every opportunity to save, but don’t.

        And none of those kids with the marshmallows betrayed any hint that they were not all of the same socioeconomic class.

        1. I appreciate you sharing your background and much of it resonates with my own. I am a child of immigrants who grew on the lesser side of the socioeconomic spectrum. At the age of 10, if given a choice to eat the marshmallow now or wait for a promise of 2 marshmallows later, I might have chosen the now. Compared to currently, 80% of what we make is saved and invested.

          All this to say the confounders are many and succumbing to the allure of a pillowy gooey marshmallow is not predictive of economic success later in life.

  9. I think the answer to your questions are summed up simply, Americans have it easy.

    Sure, you can make waves about the different social classes, etc., but the truth is with effort everything is possible. There are so many stories where people from other countries come to America and take out loans and start businesses and succeed. The entry level for getting funding and/or loans of almost any kind are easy in the US. Motivation of the individual is the key here.

    As a result, I feel like most people don’t save as much because they don’t have to. They fall behind, and there are ways to get bailed out. If they can’t get a consolidation loan to bail them out then eventually they can claim bankruptcy.

    With Bankruptcy comes 7 years of questionable credit, but guess that happens at the end of that term? You get to start all over again and repeat the cycle. So why would someone put a lot of effort into savings if they know they can run up the debt, and them jump out of the way and start again?

    I actually knew a guy who had a very high life insurance policy and that was the only thing he paid. His plan was to max all credit available and run up as much debt as possible. Then ideally on his death bed his policy would cover his costs through life. He was basically the king of the balance transfer. Floating debt for years on end.

    In direct contrast and to answer your post question(s):

    Personal savings rate is roughly 37% right now. I’ve been higher in the past and will likely return but I made some large renovations to the house this year so lots of the would be savings went to that. Also, the kids are playing numerous sports and there have been some travel expenses this year making up for lost time during Covid. So, perhaps in 2023 I will return to saving more.

    Also, I benefitted from some lucky investments in the past so there was a year where I saved 100% of income which was more than 5X typical income. That, coupled with a strong likely hood of family inheritance makes me dial it back a bit. Though, I never really think about the pending inheritance because who knows, the family trust could change and maybe its all given to a sea turtle rescue. Never count your chickens as they say…

    Curious though on your definition of savings/investing percentage. Would you count paying off primary mortgage in that calculation for savings percentage? Its guaranteed returns especially with inflation so high. I could see a case for it either way.

    1. I don’t include paying down mortgage as part of savings. But it definitely is a type of forest savings that builds your net worth overtime.

      It’s fun to wake up 10 years later and see how much home equity you have build through paying down a mortgage and home price appreciation. A good blog post to discuss!

      And yes, Americans do have an easy relative to citizens from other countries. It was pretty apparent when I came to America at the age of 14 from Malaysia, how easy life was in comparison.

      No need to save as much if things are easy! Contrast that to the 20% of 30% national average savings rates in China, Singapore, Taiwan, and other Asian countries.


  10. Fabulous Frank

    Let us be honest for a moment.
    The truth is that only %6.68 of Americans have incomes over 200k per year.
    Saving have of this money after taxes and living expenses means decades of suffering.
    If living in a cramped, tiny space in a mediocre neighborhood, driving old cars, eating the same boring food, wearing old clothes, rarely going out with others, taking little to no vacations every year in the name of saving an investing to have millions 30 years down the road is living your best life so be it. What kind of human being will you become after decades of this behavior ?
    We haven’t even discussed the added financial and emotional challenges of having a spouse and raising a family !! Not to mention the emotional hell you will have to pay at work for decades making that kind of salary, if you can even survive it. A whopping %87 of millionaires in the US are self employed professionals and business owners. We can save that discussion for another time. My heart bleeds for the young people in this country that have been handed a terrible mess. Something must change. God Bless our youth.

    1. CaptnCashFlow

      “We haven’t even discussed the added financial and emotional challenges of having a spouse and raising a family !! Not to mention the emotional hell you will have to pay at work for decades making that kind of salary, if you can even survive it”

      So true yet the reality so shamefully hidden

    2. May I ask why you came up with a $200,000 figure? The median saving rate is for all American households and based off the median household income of around $75,000 today.

      The higher, your income, the higher, the saving rate. Check out this post, which I should intralink:

      My whole point of the article is to say that Americans are doing better than expected. And to not have to worry about us or cry for us. We will find a way.

  11. CaptnCashFlow

    Thanks as always, Sam!

    I see your thesis as being directionally plausible, but that this COVID moment in world history deserves some caveat footnotes.

    I, unfortunately, aside from your beloved readership of course, don’t have confidence in my average fellow American to not fall prey to the trillions of dollars spent on influencing us to spend.

    When a household doesnt (cannot) have the expenses of student loans, transportation, elected healthcare, vacations, entertainment, housing payment requirements, childcare, etc PLUS you are getting extraordinary gov stimulus, and, at least for a moment there, everybody was even scared to take package deliveries cause they thought the covid was surface contagious… i mean, yea, i hope even a doorknob has a better balance sheet under those forced conditions! But, and you know this, who and what had record profits and demand once the initial shock wore off? Lowes, home depot, amazon, my handyman, etc.

    Pulling # out of my ass, but 90% of the 2/3s that owned a home refi’d during that period (i did for all my properties) lowering monthly overhead on top of the above conditions. In my SoCsl high cost living area, there were TONS of residential construction as everybody got locked in their homes long enough to want to spruce it up especially with their enhanced zillow equity wealth. Oh, and if one thinks thought their home situation was fine or maybe a renter, there are these great new ways to rid their new wealth bounty that is covid friendly: yolo it away with Robin hood, crypto, and/or draftkings!

    But, where are we now? Household savings are plummeting, credit card balances increasing with interest expense rates also increasing all while everyone’s anchored perception of each $1usd they think they have is actually worth 80cents or less on this side of the pandemic (and going lower!).

    Perhaps similar to the abysmal record of average folks with lottery or other financial windfalls, poor financial literacy and habits might be covered up for that moment, but it is a matter of time before the same financial situation or worse finds its way to the foreground again.

    You , me, and most your readership are not like this – but most USA folks are as all the stats show. What maybe changes that? Historically and across cultures: prolonged and searing economic hardship which people ultimately accept personal responsibility for not only their actions, but a large part of their current and future outcomes. Maybe the last time the usa had this was the Great Depression?

    Until then, i cannot help but think that most will be their own worst enemy…

    1. CautiousOptimism

      Very well said. I think Sam’s being a little too optimistic. He was very optimistic of the stock market in late 2020 and that interest rates wouldn’t rise to the levels they have. That proved very wrong. We are in a very precarious situation moving forward. If the job market turns south.. which already looks to be occurring with Meta and Twitter mass layoffs. Saving money gets hard with no job.

      1. If a 18.4% and 28.71% return in the S&P 500 for 2020 and 2021 is wrong, I don’t want to be right.

        But at the end of the day, most of my returns and wealth is mainly due to luck. And 2022 has finally been a bad year after so many lucky years. I focus on asset allocation.

        But I do like this call on November 2: The Most Bullish Indicator Yet. The bear market has also made it easier to generate more passive income.

        Did you not also benefit from the 2020 and 2021 bull run? If not, what were you investing in? Are you unable to save more if you want to?

        1. CautiousOptimism

          I misspoke, meant mid- late 2021… nasdaq lost all its gains in a short time. Back to mid 2020 levels now. I was gonna diversify my tech etfs, but too late now.

          We saved a good bit… can always save more with less eating out.. a big expense for us. But the biggest savings for us has been no student loan payments and getting on track for full PSLF loan forgiveness in 2.5 years. On track now to get $80k forgiven which is huge due to the 10 year public service loan forgiveness program. My wife is on year 8 of payback.. without having to make payments for 3 years.

          1. Yes, too late now. But lesson learned for the future. You just need to practice equating how much you’ve lost and gain into how much time you’ve lost and saved.

            See: FS SEER

            If you get $80K of loans forgiven that is huge! I would have loved to have gotten my $45,000 in MBA loans forgiven too.

            Oh well, in the next life!

            1. CautiousOptimism

              I will say all our losses in our tech ETF are in my wife’s tech heavy retirement account. She’s 42 so we’ve got 20 years at least to recoup. I have no after tax equity exposure to the market currently and very glad I avoided getting into the market with after tax money in 2020 in hindsight. I really think I would have lost most of it. The stocks I liked during that time were all tech and tech IPOs that launched in 2020. Anyone that put money into DoorDash, Roblox, Carvana, Draftkings.. all the high flying IPOs the last few years got killed. So I’m glad I avoided all of those.. even though I had tons of FOMO avoiding them in mid-2021.

              So one good thing about giving up a lot of gains in my Tech ETFs in retirement accounts is it could have been much worse. My apple stock did fine.. my meta stock is now back to my purchase price… painful after the run up, but can’t sell now.

              1. You are blessed to have a working wife who is willing to work until 62. Nobody I know anymore has found a job they’d be willing to do in their 60s. But that’s also bc of the world I live in now as one of the creators of the modern-day FIRE movement.

      2. CautiousOptimism,

        If you’re unable to save more and you missed the huge equity gains in 2020 and 2021, I would work harder and start investing now. A downturn gives you another chance.

        Over the long run, investors are just going to get wealthier and wealthier. So you are either going to keep up or get left behind.

        The entire tech sector could be wiped out, and the unemployment rate would only increase by 0.3%.

        1. CautiousOptimism

          I was heavily invested in tech etfs. They were clobbered back to pre-pandemic levels in a lot of cases. Nasdaq is back to fall 2020 level. Really wish I had taken some of those 50% gains in mid-2021. All that went poof… gone like it never happened.

  12. Folks who are at this site get it,got it,
    DID it. I wish most of the population would try .
    Don’t most senior Americans survive off of ssi with minimal savings ….?

  13. PandemicSaver

    I did realize how much money can be saved during the pandemic also. But most of that was because a major expense for my daughter’s gymnastics training and travel was put on hold. Also, things like student loans being paused really helped. I factor we saved about $20K in 2020 because of those two bill not needing being paid. We’ve managed to keep that cash cushion and then some since. But our monthly savings has dropped dramatically this past year with things going back to normal.

    A lot of the pandemic savings was due to FORCED saving situations. When you can’t do anything but sit at home and play in your backyard on vacation… You obviously save money.

    But then I’ve always said… if your retirement dream plans just involved putting around the house and gardening in your yard… then most people can live on Social Security alone if they outright own their home.

  14. I do believe we can all save more if we really want to especially in times of great uncertainty and fear. Any type of saving takes discipline and most importantly motivation. When we have a stronger emotional incentives and purposes for saving it becomes much easier and more meaningful. Fear is a very powerful motivator for saving out of one’s normal comfort zone!

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