The reason Americans are not saving as much for retirement as they sh/could is because under current fiscal policies savers are losers. It does NOT pay to save money when Fed policy is to keep interest rates artificially low. When the real rate of inflation is 11 - 12%, yet banks are only paying 1 - 2% interest at best, one is effectively losing money by saving it.
It may not pay to keep money in the bank with rates as low as they are. But it sure makes sense to keep the money in the stock market. Just buying a DJIA tracking stock will give an average annual rate of return about 9.972% (give or take half a percent depending on how you account for certain events). Indeed, between 1900 and 2011, the average annual rate of return was 9.4%. For 2011, the DJIA's rate of return was 8.3% (slightly below the average) and 2012-YTD the rate of return is 7.2% and we still have a few weeks to go.
as a result, people are forced to invest their money in rigged ventures like the stock market where big banks sell clients worthless instruments, then make huge bets against the worthless instruments they just sold. Clients desperate to recoup their losses invest gamble what little they have left with the same crooks who use previously illegal sophisticated high frequency computer trading algorithms designed to front run the markets and siphon off what little money they have left, before they bankrupt everyone, and crash the markets... leaving countless thousands without any sort of savings left.
Sure, if you try to micromanage your stock holdings to "buy low, sell high" and doing day-trading, chances are you're going to get the short end of the stick. But the numbers don't lie. Buy large index tracking shares consistently, and you are overwhelmingly likely to come out way ahead. Let's break out the popcorn!
If you started by buying $1000 of gold a year in 1980, and continued buying $1000 per year for 30 years until 2011 you would get:
January 1980 with gold hovering at $1975 per troy ounce: $1,000 gets you approximately 0.5 ounces of gold.
January 1981 with gold hovering at $1450 per troy ounce: $1,000 gets you approximately 1.5 ounces of gold.
January 1982 with gold hovering at $930 per troy ounce: $1,000 gets you approximately 1.1 ounces of gold.
January 1983 with gold hovering at $1120 per troy ounce: $1,000 gets you approximately 0.9 ounces of gold - let's say it's 1 and call it even.
January 1984 with gold hovering at $820 per troy ounce: $1,000 gets you approximately 1.2 ounces of gold.
January 1985 with gold hovering at $650 per troy ounce: $1,000 gets you approximately 1.5 ounces of gold.
January 1986 with gold hovering at $710 per troy ounce: $1,000 gets you approximately 1.4 ounces of gold.
January 1987 with gold hovering at $830 per troy ounce: $1,000 gets you approximately 1.1 ounces of gold.
January 1988 with gold hovering at $930 per troy ounce: $1,000 gets you approximately 0.9 ounces of gold - let's say it's 1 and call it even, again. What's a tenth of an ounce between friends?
January 1989 with gold hovering at $750 per troy ounce: $1,000 gets you approximately 1.4 ounces of gold.
January 1990 with gold hovering at $730 per troy ounce: $1,000 gets you approximately 1.4 ounces of gold.
January 1991 with gold hovering at $650 per troy ounce: $1,000 gets you approximately 1.6 ounces of gold.
January 1992 with gold hovering at $580 per troy ounce: $1,000 gets you approximately 1.7 ounces of gold - let's say it's 2, just for shits and giggles.
January 1993 with gold hovering at $520 per troy ounce: $1,000 gets you approximately 1.9 ounces of gold - again, let's say it's 2 since the "Sad but True" single is about to get released!
January 1994 with gold hovering at $600 per troy ounce: $1,000 gets you approximately 1.7 ounces of gold - let's pretend you get 2 because Kurt Kobain died and the fulfillment clerk was upset and couldn't count right.
January 1995 with gold hovering at $560 per troy ounce: $1,000 gets you approximately 1.8 ounces of gold - let's pretend that a Pentium FDIV bug causes you to get 2 ounces instead!
January 1996 with gold hovering at $580 per troy ounce: $1,000 gets you approximately 1.7 ounces of gold.
January 1997 with gold hovering at $500 per troy ounce: $1,000 gets you exactly 2 ounces of gold.
January 1998 with gold hovering at $400 per troy ounce: $1,000 gets you approximately 2.5 ounces of gold!
January 1999 with gold hovering at $390 per troy ounce: $1,000 gets you approximately 2.6 ounces of gold! Good times!
January 2000 with gold hovering at $380 per troy ounce: $1,000 gets you approximately 2.6 ounces of gold. But times are good, it's the millenium and the fulfillment clerk slips a bit more - you get exactly 3 ounces this year!
January 2001 with gold hovering at $340 per troy ounce: $1,000 gets you approximately 3 ounces of gold. If this keeps up you'll need a bigger cookie jar!
January 2002 with gold hovering at $360 per troy ounce: $1,000 gets you approximately 2.7 ounces of gold.
January 2003 with gold hovering at $400 per troy ounce: $1,000 gets you approximately 2.3 ounces of gold.
January 2004 with gold hovering at $500 per troy ounce: $1,000 gets you exactly 2 ounces of gold. A fluke associated with the upcoming Athens Olympics causes you to get 4 instead.
January 2005 with gold hovering at $500 per troy ounce: $1,000 gets you exactly 2 ounces of gold. You buy a new cookie jar for your assets and discover it had another 2 ounces hidden inside! SCORE!
January 2006 with gold hovering at $620 per troy ounce: $1,000 gets you approximately 1.6 ounces of gold.
January 2007 with gold hovering at $700 per troy ounce: $1,000 gets you approximately 1.5 ounces of gold.
January 2008 with gold hovering at $950 per troy ounce: $1,000 gets you approximately 1.1 ounces of gold.
January 2009 with gold hovering at $980 per troy ounce: $1,000 gets you approximately 1.1 ounces of gold.
January 2010 with gold hovering at $1120 per troy ounce: $1,000 gets you approximately 0.9 ounces of gold; the stars align, and you actually get 1 ounce delivered instead!!
January 2011 with gold hovering at $1360 per troy ounce: $1,000 gets you approximately 0.8 ounces of gold. Since you are a valued customer, you get 0.2 ounces for free, and an extra ounce. Total: 2 ounces for the year!
So... now let's tally up, shall we? You've spent exactly $30,000 buying gold. Your cookie jar has 58.8 ounces of gold. And mysteriously enough one delicious chocolate chip cookie. You wrap the coins up and eat the cookie on your way to sell the gold. Good fortune is with you, and you are the 1000th customer to walk in the store. As a reward, the owner offers to buy your gold at $2,000 per ounce, a substantial bonus over the actual spot price! You are flying high and are already thinking about all the gold you can buy with the money you're about to get! After a few minutes, the owner comes back with a check for $117,600. DAMN! That's great.
OR IS IT? Let's see.
You see, while you busy buying gold, I was busy consistently investing $1,000 per year in the stock market, splitting it evenly between tracking stocks for the S&P500 and the NASDAQ. The annualized rate of return of the NASDAQ for the period was 9.73%, but let's just say it's 9% to keep the numbers nice and tidy. The S&P500 is at a respectable 8.28% but commissions eat into my profits and I only make 8%! Also, because of a weird computer fluke, I never receive any dividend income - it just disappears and I don't know better. Oh well...
By a mysterious stroke of luck, as you walk, eating your cookie, I go online. My S&P investment of $15,000 has grown to $69,376.33 and my $15,000 NASDAQ investment has grown to $85,488.64, totaling $154,864.97.
So, despite the fact that throughout the years because of numerous mistakes by fulfillment clerks, computer bugs and careless cookie jar sellers you benefit with 5.8 ounces of gold for free, and despite being allowed the sell at almost $300.00 more per troy ounce than the spot price of gold, I still have $37,000 more than you. And this is despite my inability to properly invest dividends and my other difficulties!
But hey... at least you have a cookie.