For those of you who watch or have heard of the hit series “Mad Men,” you’ll know that the show provides an interesting story line, some fascinating characters, and great commentary on the social mores and gender differences of the late ’50s and early ’60s.
I’ve been watching lately with an eye toward the financial side of life in that era. There are no credit cards to speak of—Don Draper, the main character, peels off cold cash when he asks his secretary to buy Christmas presents for his children. This is pre-401(k)s and IRAs, and Don and his band of not-so-merry marketers left behind whatever pensions they had coming to them when they broke with their old advertising agency to go out on their own. There is little if any dialogue concerning personal investing at all.
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Do you have a tax refund coming? Some would say it means you over-withheld and should have paid less last year. Others look at it as a non-interest-bearing savings account. I’d look at it as an opportunity to improve your financial picture and prepare for the next inevitable downturn—whether it happens next week, next month, or five years from now.
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I’ve been watching the U.S. consumer savings rate climb. It’s been heartening to witness the ascent past 5% on its way to perhaps 7%. Any way you look at it, this is a welcome—if not critical—change in our financial/economic behavior.
I started digging into how this rate is computed and asked a few of our resident economists for some explanation. As a result, I don’t feel quite as good about the savings rate as I did, but I understand the basis for it much better.
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Are Americans becoming more thrifty? Personal savings rates are up, the government statistics tell us. This fact has engendered a wide-ranging debate. Is this just a short-term deviation from America’s obsession with spending, or is it a permanent change?
I believe it’s a permanent change, but not for the reasons you might think.
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One of our readers recently asked about Vanguard’s view on 401(k) loans.
As you might know if you’ve poked around Vanguard.com, we generally frown upon retirement plan loans, to put it mildly. In fact, Vanguard’s intranet for employees recently featured an article cautioning us against borrowing from our own retirement accounts.
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