What the Personal Saving Rate May Be Telling Us About the U.S. Consumer

By the Investment Committee at Rigden Capital Strategies
Data and opinions as of July 14, 2026

The financial health of the American consumer remains an important subject for investors. One indicator receiving increased attention is the U.S. personal saving rate—the percentage of disposable personal income remaining after households pay taxes and cover their spending.

According to the Bureau of Economic Analysis, the personal saving rate was 3.0% in May 2026, compared with 4.5% in January. Although monthly figures can change as additional information becomes available, the recent decline has raised questions about whether households are becoming financially stretched.

One explanation is that the decline is partly demographic. As Baby Boomers retire, they may replace employment income with Social Security, pensions, portfolio withdrawals and other resources. Because retirees may spend accumulated assets rather than save from current wages, an aging population could place some downward pressure on the aggregate saving rate. We believe demographics are relevant, but they may not fully explain the recent movement in savings. The available data present a more nuanced picture.

How Retiree Spending Fits Into the Saving-Rate Discussion

Spending generally declines among older households

The Bureau of Labor Statistics Consumer Expenditure Survey shows that average expenditures vary substantially by the age of a household’s reference person.

These figures suggest that spending generally declines among older consumer units. However, the comparison has important limitations. Consumer units in the 65-and-older category averaged approximately 1.8 people, compared with approximately 3.0 people in the 45–54 category. Older households also generally have fewer earners and different housing, healthcare and transportation expenses.

The data therefore should not be interpreted to mean that every household reduces spending immediately upon retirement. They indicate only that average expenditures tend to be lower among consumer units with older reference persons.

Retirement does not eliminate measured personal income

The demographic explanation can also oversimplify how income is measured.

The Bureau of Economic Analysis definition of personal income includes more than wages and salaries. It also includes sources such as:

• Social Security and other government benefits
• Pension-related income
• Interest and dividends
• Rental income
• Business and proprietors’ income

As a result, a worker’s retirement does not necessarily cause all of that person’s income to disappear from the national accounts.

There is also an important distinction between measured personal income and spendable cash. For example, BEA includes Medicare and certain other government healthcare benefits in its measures of social benefits. These benefits affect the national income and spending statistics but are not equivalent to discretionary cash deposited into a retiree’s bank account.

For that reason, both the demographic composition of the population and the construction of the economic data must be considered when interpreting the saving rate.

Other Factors That May Be Affecting Savings

We believe at least two additional forces may be contributing to the decline in the saving rate.

1. Elevated household wealth

Household net worth can influence saving and spending behavior.

The Federal Reserve reported that the net worth of households and nonprofit organizations was approximately $183 trillion at the end of the first quarter of 2026. While net worth changed little during the quarter, the ratio of household net worth to disposable personal income remained well above its historical average.

When investment portfolios, real estate and other assets appreciate, some households may feel less pressure to save a large percentage of each paycheck. This is commonly referred to as the “wealth effect.”

However, the benefits are not distributed evenly. Households with substantial financial assets may feel more secure, while those relying primarily on wages may receive limited benefit from rising stock or real estate values.

Asset values can also decline. A household that reduces saving because of recent investment gains may become more financially vulnerable if markets reverse.

2. Higher essential expenses

Recent energy-price volatility may also have affected household budgets.

The BLS reported that the energy component of the Consumer Price Index increased 15.7% during the 12 months ending June 2026, driven in part by a 26.7% year-over-year increase in gasoline prices. Energy prices did fall 5.7% during June, illustrating how quickly these costs can change.

Higher fuel, utility, food, insurance and housing expenses can cause households to temporarily reduce savings in order to maintain their normal level of consumption.

The impact varies significantly. A household with a long commute, limited savings and a fixed housing budget may experience price increases differently from a higher-income household with substantial assets.

For this reason, aggregate statistics can conceal meaningful differences among consumers.

Income Growth May Be the More Important Indicator

The saving rate is useful, but we do not believe it should be viewed in isolation.

For the 12 months ending March 2026, the Employment Cost Index showed wages and salaries increasing 3.4%. Separately, average hourly earnings increased 3.5% during the 12 months ending June.

By comparison, the BEA’s Personal Consumption Expenditures Price Index increased 4.1% during the 12 months ending May 2026. Real disposable personal income increased 0.3% during May after declining 0.5% in April.

These measures cover different periods and use different methodologies, so they should not be treated as direct one-to-one comparisons. Taken together, however, they suggest that many households have had relatively little margin between income growth and rising living costs.

Interest rates also remain relevant. The Federal Reserve maintained its federal-funds target range at 3.50% to 3.75% following its June 2026 meeting. Higher borrowing costs can place additional pressure on households carrying variable-rate debt or seeking new auto, mortgage or credit-card financing.

A Mixed Consumer Backdrop

The labor market continues to provide support for household spending, but recent data have been less uniformly strong.

In June 2026:

• The unemployment rate was 4.2%.
• Nonfarm payroll employment increased by 57,000.
• Average hourly earnings were 3.5% higher than one year earlier.
• The number of long-term unemployed was 286,000 higher than one year earlier.
• The labor-force participation rate declined to 61.5%.

The BLS characterized both payroll growth and the unemployment rate as having changed little during the month.

In our view, these figures do not indicate that the American consumer is on the verge of an immediate collapse. Employment, income and household wealth continue to support spending.

At the same time, the data do not support treating all consumers as equally strong.

Higher-income households with investment assets, home equity and lower debt burdens may remain relatively insulated. Lower- and middle-income households that depend more heavily on wages may be more sensitive to higher prices, borrowing costs and changes in employment.

Our Market Perspective

Based on currently available information, our base-case expectation is for consumer spending growth to moderate rather than accelerate significantly through the remainder of 2026 and into 2027.

This is an opinion, not a guarantee. Consumer spending could be stronger or weaker depending on factors including:

• Employment and wage growth
• Inflation and energy prices
• Federal Reserve policy
• Tax and fiscal policy
• Credit availability
• Geopolitical developments
• Equity and real estate values
• Consumer confidence

Within client portfolios, we generally favor a diversified and quality-focused approach rather than making concentrated investments based on a single economic forecast.

Depending on each client’s circumstances, that may include an emphasis on businesses we believe have durable cash flow, manageable debt, competitive advantages and the ability to navigate changing economic conditions.

Companies viewed as financially strong or possessing pricing power can still decline in value. These characteristics are subjective, may change over time and do not protect against market loss. Quality-focused investments can also underperform other investment styles for extended periods.

Actual portfolio positioning varies based on each client’s objectives, risk tolerance, income needs, tax circumstances, time horizon and other considerations.

The Bottom Line

The recent decline in the personal saving rate deserves attention, but it should not be reduced to a single explanation.

Demographic changes may have some effect as more Americans enter retirement. However, older households also tend to spend less on average, and retirees continue to receive income from a variety of sources included in the national data.

Elevated household wealth, higher essential expenses, slower real income growth and differences among income groups may also be influencing the saving rate.

Rather than relying on one headline statistic, we believe investors should monitor a broader set of indicators, including employment, wage growth, inflation, real disposable income, household debt and consumer spending.

Most importantly, long-term investment decisions should remain connected to an individual financial plan rather than short-term economic predictions.

Sources

1. U.S. Bureau of Economic Analysis, Personal Income and Outlays, May 2026, released June 25, 2026.
2. U.S. Bureau of Labor Statistics, Consumer Expenditure Surveys: Age of Reference Person, 2024, Table 1300.
3. U.S. Bureau of Labor Statistics, Consumer Expenditures—2024, released December 19, 2025.
4. Board of Governors of the Federal Reserve System, Financial Accounts of the United States, First Quarter 2026.
5. U.S. Bureau of Labor Statistics, Consumer Price Index—June 2026, released July 14, 2026.
6. U.S. Bureau of Labor Statistics, Employment Cost Index—March 2026.
7. U.S. Bureau of Labor Statistics, The Employment Situation—June 2026, released July 2, 2026.
8. Board of Governors of the Federal Reserve System, Federal Open Market Committee statement, June 17, 2026.

Important Disclosures

Rigden Capital Strategies is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a particular level of skill or training.

The information, views and opinions expressed in this article are provided for educational and informational purposes only. They do not constitute individualized investment, legal, accounting or tax advice; a recommendation; or an offer to buy or sell any security.

This material has been prepared without regard to the financial circumstances, objectives, risk tolerance or needs of any specific person. Readers should consult with qualified professionals regarding their individual circumstances before making financial decisions.

Economic and market opinions are as of July 14, 2026, are based on information available at that time and may change without notice. Forward-looking statements reflect current expectations and assumptions. Actual economic, market and investment outcomes may differ materially.

Economic and survey data have been obtained from sources believed to be reliable, including the U.S. Bureau of Economic Analysis, the U.S. Bureau of Labor Statistics and the Federal Reserve. Data are preliminary in some cases, are subject to revision and may be reported using different periods, definitions and methodologies. Rigden Capital Strategies does not guarantee their accuracy or completeness.

References to general investment positioning may not reflect the holdings, strategies or performance of every client account. Portfolio recommendations and holdings vary according to each client’s objectives and circumstances.

Past performance does not guarantee future results. All investments involve risk, including the possible loss of principal. Asset allocation and diversification do not assure a profit or protect against loss in declining markets. Management fees, transaction expenses and taxes may reduce investment returns.