<p>Barrons, there are two somewhat parallel but separate data streams we’re talking about: the change in family wealth and the change in personal income. Personal income can be tracked because the tax returns identify the individual. Family net worth is harder to track because the composition of the “family” can change with time. I honestly don’t know if the middle class is less inclined to save today than they were forty years ago; I do know that their inflation-adjusted income is less per taxpayer, and that a lot of expenses faced by the middle class have increased at a rate higher than that of inflation - medical care, college expenses, housing costs, etc. - which makes it harder to save, since the data we do have says there’s just less paycheck left over at the end of the month even with the same spending habits for everyone below the 75th percentile in income. </p>
<p>I also think the family wealth data we do have tends to overstate the net worth of families today compared to those in the past since in the past retirement would be more likely to be funded by a defined-benefit pension plan, and I don’t think that the cash value of such plans is included in the personal “wealth” calculations, while IRA’s 401K’s etc. which people rely on today to fund their retirment are.</p>