Editorial: Save now, or regret later

Friday, Aug. 25, 2006 | 7:23 a.m.

T he U.S. Commerce Department reports that in 2005, Americans as a whole had a negative savings rate of 0.5 percent, meaning that they spent more than they earned. The department says that personal savings have been tailing off since 1985, when Americans saved 11.1 percent of their disposable income. But a negative savings rate, according to the department, had not been recorded since the Great Depression.

Savings are critical in case of a sudden illness or loss of job, to compensate for a loss of home equity in a housing bubble, to pay for children's college education, as preparation for old age and for dozens of other reasons. Yet a majority of Americans are more inclined these days to spend now and worry about saving later.

Although there are a number of ways to save, one of the easiest is through payroll deductions for deposit into 401(k) accounts, offered by many companies. Many people are still rejecting this option, though, for a variety of reasons. Those who do not participate because they believe 401(k) plans are apt to stagnate or even lose money will be interested in a new study showing just the opposite.

The Employee Benefit Research Institute and the Investment Company Institute, two Washington-based associations, studied company-sponsored 401(k) accounts over the past seven years. Despite the market downturn of 2000-2002, the accounts grew by more than 50 percent, the study found, according to a report by the Associated Press.

One of the study's authors said the finding shows "the significant power of regular, consistent savings behavior."

Whether through a 401(k) account or some other plan, we believe working people who aren't putting something away every pay period will live to regret it.