SubscribeThe savings rate is computed by taking the amount of personal income left after taxes are paid, an amount known as disposable income, and subtracting the amount of spending.This is interpreted by some to mean that only "taxable" income is included as income and since 401(k) contributions aren't counted as "taxable" they are excluded. This is false. The BEA's methodology documents and glossary (both of which I've linked to above) make this patently clear. Both 401(k) contributions and pensions are counted as income, the former under "Wage and salary accruals and disbursements" and the latter under "Supplements to wages and salaries".
[a]ny American with net worth tied up in a home's value, a 401(k) or stocks. [...] In [my book] that's a form of savings. The government, though, counts only how fast you pay down your home's mortgage.This is wrong on 2 out of 3 counts. It is true that the official savings figures don't count capital gains (you can see the explanation for their reasoning in this FAQ). However, it is not true that retirement plan contributions aren't counted. I hope my previous posts are sufficiently persuasive because I'm not sure what else would be more convincing.
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What is your basis for this belief?
According to the BEA (the relevant gov't agency), personal saving is defined as "personal income less the sum of personal outlays and personal current taxes". No mention of dynamism or choice. In fact, on page 9 of this paper outlining their definitions and methodology, 401k contributions are explicitly counted in wage and salary accruals (i.e.: a part of personal income).
posted by mhum at 6:21 PM on April 10, 2007